##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-23975
 
 FIRST NIAGARA FINANCIAL GROUP, INC.
  
 Delaware
    
    42-1556195(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)6950 South Transit Road, P.O.
Box 514,Lockport, NY
    
    14095-0514(Address of principal executive offices)
    
    (Zip Code)
 (716) 625-7500
 
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
  o o




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##### 



FIRST NIAGARA FINANCIAL GROUP, INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2009
TABLE OF CONTENTS
 Item Number
    
    Page NumberPART I  FINANCIAL INFORMATION1. Financial StatementsConsolidated Statements of Condition as of 
March 31, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income for the 
three months ended March 31, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statements of Comprehensive Income for the 
three months ended March 31, 2009 and 2008 (unaudited)
    
    
    5Consolidated Statements of Changes in Stockholders Equity for the 
three months ended March 31, 2009 and 2008 (unaudited)
    
    
    6Consolidated Statements of Cash Flows for the 
three months ended March 31, 2009 and 2008 (unaudited)
    
    
    7Notes to Consolidated Financial Statements (unaudited)
    
    
    82. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    173. Quantitative and Qualitative Disclosures about Market Risk
    
    
    254. Controls and Procedures
    
    
    26PART II  OTHER INFORMATION1. Legal Proceedings
    
    
    261A. Risk Factors
    
    
    262. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    263. Defaults Upon Senior Securities
    
    
    264. Submission of Matters to a Vote of Security Holders
    
    
    265. Other Information
    
    
    266. Exhibits
    
    
    27Signatures
    
    
    28EX-31.1EX-31.2EX-32
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Condition
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)AssetsCash and cash equivalents
    
    $
    161,908
    
    
    
    110,552Restricted cash
    
    
    4,000
    
    
    
    3,999Securities available for sale
    
    
    1,800,933
    
    
    
    1,573,101Loans held for sale
    
    
    3,573
    
    
    
    1,698Loans and leases, net of allowance for credit losses of $79,613 and
$77,793 in 2009 and 2008
    
    
    6,366,222
    
    
    
    6,384,284Bank owned life insurance
    
    
    128,460
    
    
    
    127,151Premises and equipment, net
    
    
    107,780
    
    
    
    95,978Goodwill
    
    
    748,971
    
    
    
    748,971Core deposit and other intangibles, net
    
    
    33,837
    
    
    
    35,578Other assets
    
    
    232,293
    
    
    
    250,060Total assets
    
    $
    9,587,977
    
    
    
    9,331,372Liabilities and Stockholders EquityLiabilities:Deposits
    
    $
    6,228,096
    
    
    
    5,943,613Short-term borrowings
    
    
    666,836
    
    
    
    717,464Long-term borrowings
    
    
    780,049
    
    
    
    822,763Other liabilities
    
    
    170,605
    
    
    
    120,269Total liabilities
    
    
    7,845,586
    
    
    
    7,604,109Stockholders equity:Preferred stock, $0.01 par value, 50,000,000 shares authorized;
Series A, cumulative perpetual preferred stock, $1,000
liquidation value, 184,011 shares issued and outstanding
in 2009 and 2008
    
    
    177,240
    
    
    
    176,719Common stock, $0.01 par value, 250,000,000 shares authorized;
125,419,261 shares issued in 2009 and 2008
    
    
    1,254
    
    
    
    1,254Additional paid-in capital
    
    
    1,325,193
    
    
    
    1,326,159Retained earnings
    
    
    369,293
    
    
    
    369,671Accumulated other comprehensive loss
    
    
    (15,697
    )
    
    
    (29,429
    )Common stock held by ESOP; 3,036,682 and 3,094,365 shares
in 2009 and 2008
    
    
    (23,464
    )
    
    
    (23,843
    )Treasury stock, at cost; 6,731,893 and 6,857,554 shares
in 2009 and 2008
    
    
    (91,428
    )
    
    
    (93,268
    )Total stockholders equity
    
    
    1,742,391
    
    
    
    1,727,263Total liabilities and stockholders equity
    
    $
    9,587,977
    
    
    
    9,331,372
   3




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Income (unaudited)
 Three months endedMarch 31,2009
    
    
    2008Interest income:Loans and leases
    
    $
    87,059
    
    
    
    95,052Securities available for sale and other investments
    
    
    18,760
    
    
    
    14,935Total interest income
    
    
    105,819
    
    
    
    109,987Interest expense:Deposits
    
    
    20,913
    
    
    
    37,108Borrowings
    
    
    12,276
    
    
    
    12,817Total interest expense
    
    
    33,189
    
    
    
    49,925Net interest income
    
    
    72,630
    
    
    
    60,062Provision for credit losses
    
    
    8,750
    
    
    
    3,100Net interest income after provision for credit losses
    
    
    63,880
    
    
    
    56,962Noninterest income:Banking services
    
    
    9,970
    
    
    
    9,310Insurance and benefits consulting
    
    
    12,548
    
    
    
    12,762Wealth management services
    
    
    2,218
    
    
    
    2,217Lending and leasing
    
    
    1,984
    
    
    
    2,255Bank owned life insurance
    
    
    1,309
    
    
    
    1,177Other
    
    
    431
    
    
    
    1,546Total noninterest income
    
    
    28,460
    
    
    
    29,267Noninterest expense:Salaries and employee benefits
    
    
    33,237
    
    
    
    33,419Occupancy and equipment
    
    
    6,466
    
    
    
    7,160Technology and communications
    
    
    5,053
    
    
    
    5,007Marketing and advertising
    
    
    2,532
    
    
    
    2,502Professional services
    
    
    2,964
    
    
    
    1,072Amortization of core deposit and other intangibles
    
    
    1,891
    
    
    
    2,251Federal deposit insurance premiums
    
    
    1,499
    
    
    
    245Litigation settlement, net
    
    
    2,845
    
    
    
    Other
    
    
    6,660
    
    
    
    5,851Total noninterest expense
    
    
    63,147
    
    
    
    57,507Income before income taxes
    
    
    29,193
    
    
    
    28,722Income taxes
    
    
    10,451
    
    
    
    9,909Net income
    
    
    18,742
    
    
    
    18,813Preferred stock dividend
    
    
    2,300
    
    
    
    Accretion of preferred stock discount
    
    
    368
    
    
    
    Net income available to common stockholders
    
    $
    16,074
    
    
    
    18,813Earnings per share:Basic
    
    $
    0.14
    
    
    
    0.18Diluted
    
    $
    0.14
    
    
    
    0.18Weighted average common shares outstanding:Basic
    
    
    115,055
    
    
    
    103,230Diluted
    
    
    115,433
    
    
    
    103,641Dividends per common share
    
    $
    0.14
    
    
    
    0.14
   4




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Comprehensive Income (unaudited)
 Three months endedMarch 31,2009
    
    
    2008Net income
    
    $
    18,742
    
    
    
    18,813Other comprehensive income, net of income taxes:Securities available for sale:Net unrealized gains arising during the period
    
    
    13,567
    
    
    
    5,876Net unrealized losses on interest rate swaps
    
    
    (25
    )
    
    
    Pension and post-retirement adjustments
    
    
    190
    
    
    
    17Total other comprehensive income
    
    
    13,732
    
    
    
    5,893Total comprehensive income
    
    $
    32,474
    
    
    
    24,706
   5




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Changes in Stockholders Equity unaudited)
 Accumulated
    
    
    CommonAdditional
    
    
    
    
    
    
    other
    
    
    stockPreferred
    
    
    Common
    
    
    paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    held by
    
    
    Treasurystock
    
    
    stock
    
    
    capital
    
    
    earnings
    
    
    loss
    
    
    ESOP
    
    
    stock
    
    
    TotalBalances at January 1, 2009
    
    $
    176,719
    
    
    
    1,254
    
    
    
    1,326,159
    
    
    
    369,671
    
    
    
    (29,429
    )
    
    
    (23,843
    )
    
    
    (93,268
    )
    
    
    1,727,263Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,742Total other comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,732
    
    
    
    
    
    
    
    
    
    
    
    13,732ESOP shares committed to be released
    
    
    
    
    
    
    
    
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    591Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,259
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,259Excess tax expense from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    (119
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (119
    )Exercise of stock options and
restricted stock activity
    
    
    
    
    
    
    
    
    
    
    (2,318
    )
    
    
    (280
    )
    
    
    
    
    
    
    
    
    
    
    1,840
    
    
    
    (758
    )Accretion of preferred stock discount
    
    
    368
    
    
    
    
    
    
    
    
    
    
    
    (368
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative preferred stock dividend
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    (2,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,147
    )Common stock dividend of
$0.14 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,172
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,172
    )Balances at March 31, 2009
    
    $
    177,240
    
    
    
    1,254
    
    
    
    1,325,193
    
    
    
    369,293
    
    
    
    (15,697
    )
    
    
    (23,464
    )
    
    
    (91,428
    )
    
    
    1,742,391
 Accumulated
    
    
    CommonAdditional
    
    
    
    
    
    
    other
    
    
    stockPreferred
    
    
    Common
    
    
    paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    held by
    
    
    Treasurystock
    
    
    stock
    
    
    capital
    
    
    earnings
    
    
    income
    
    
    ESOP
    
    
    stock
    
    
    TotalBalances at January 1, 2008
    
    $
    
    
    
    
    1,200
    
    
    
    1,244,766
    
    
    
    344,656
    
    
    
    (2,604
    )
    
    
    (25,350
    )
    
    
    (209,489
    )
    
    
    1,353,179Adoption of SFAS No. 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )Balances at January 1, 2008,
as adjusted
    
    
    
    
    
    
    1,200
    
    
    
    1,244,766
    
    
    
    344,539
    
    
    
    (2,604
    )
    
    
    (25,350
    )
    
    
    (209,489
    )
    
    
    1,353,062Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,813
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,813Common stock issued for the acquisition
of Great Lakes Bancorp, Inc.
    
    
    
    
    
    
    54
    
    
    
    73,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,781Total other comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,893
    
    
    
    
    
    
    
    
    
    
    
    5,893Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,795
    )
    
    
    (6,795
    )ESOP shares committed to be released
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    
    
    
    
    406
    
    
    
    
    
    
    
    628Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,524Excess tax benefit from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96Exercise of stock options and
restricted stock activity
    
    
    
    
    
    
    
    
    
    
    (1,950
    )
    
    
    (756
    )
    
    
    
    
    
    
    
    
    
    
    2,486
    
    
    
    (220
    )Common stock dividend of
$0.14 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,150
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,150
    )Balances at March 31, 2008
    
    $
    
    
    
    
    1,254
    
    
    
    1,318,385
    
    
    
    348,446
    
    
    
    3,289
    
    
    
    (24,944
    )
    
    
    (213,798
    )
    
    
    1,432,632
   6




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows (unaudited)
 Three months ended March 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    18,742
    
    
    
    18,813Adjustments to reconcile net income to net cash provided by operating
activities:Amortization of fees and discounts, net
    
    
    2,490
    
    
    
    1,578Provision for credit losses
    
    
    8,750
    
    
    
    3,100Depreciation of premises and equipment
    
    
    3,145
    
    
    
    2,661Asset writedowns
    
    
    700
    
    
    
    890Amortization of core deposit and other intangibles
    
    
    1,891
    
    
    
    2,251Originations of loans held for sale
    
    
    (92,851
    )
    
    
    (14,584
    )Proceeds from sales of loans held for sale
    
    
    90,833
    
    
    
    16,706Loss (gain) on sale of loans
    
    
    143
    
    
    
    (172
    )ESOP and stock-based compensation expense
    
    
    1,850
    
    
    
    2,135Deferred income tax (benefit) expense
    
    
    (672
    )
    
    
    118Income from bank owned life insurance
    
    
    (1,309
    )
    
    
    (1,177
    )Net decrease (increase) in other assets
    
    
    1,140
    
    
    
    (321
    )Net increase in other liabilities
    
    
    10,539
    
    
    
    2,644Net cash provided by operating activities
    
    
    45,391
    
    
    
    34,642Cash flows from investing activities:Proceeds from maturities of securities available for sale
    
    
    40,307
    
    
    
    65,378Proceeds from sale of securities available for sale
    
    
    995
    
    
    
    Principal payments received on securities available for sale
    
    
    90,064
    
    
    
    43,069Purchases of securities available for sale
    
    
    (313,436
    )
    
    
    (67,215
    )Net decrease (increase) in loans and leases
    
    
    6,659
    
    
    
    (79,152
    )Acquisitions, net of cash and cash equivalents
    
    
    
    
    
    
    (84,983
    )Other, net
    
    
    8,307
    
    
    
    (2,809
    )Net cash used in investing activities
    
    
    (167,104
    )
    
    
    (125,712
    )Cash flows from financing activities:Net increase in deposits
    
    
    284,341
    
    
    
    95,027Repayments of short-term borrowings, net
    
    
    (90,426
    )
    
    
    (150,475
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    190,000Repayments of long-term borrowings
    
    
    (2,407
    )
    
    
    (5,893
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    51Excess tax (expense) benefit from stock-based compensation
    
    
    (119
    )
    
    
    96Purchase of treasury stock
    
    
    
    
    
    
    (6,795
    )Dividends paid on cumulative preferred stock
    
    
    (2,147
    )
    
    
    Dividends paid on common stock
    
    
    (16,172
    )
    
    
    (14,150
    )Net cash provided by financing activities
    
    
    173,070
    
    
    
    107,861Net increase in cash and cash equivalents
    
    
    51,357
    
    
    
    16,791Cash and cash equivalents at beginning of period
    
    
    114,551
    
    
    
    114,991Cash and cash equivalents at end of period
    
    $
    165,908
    
    
    
    131,782Cash paid during the period for:Income taxes
    
    $
    633
    
    
    
    5,226Interest expense
    
    
    33,639
    
    
    
    48,756Acquisition of noncash assets and liabilities:Assets acquired
    
    
    
    
    
    
    902,537Liabilities assumed
    
    
    
    
    
    
    743,766Loans transferred to other real estate owned
    
    $
    240
    
    
    
    776Securities available for sale purchased not settled
    
    
    23,526
    
    
    
    17,405Capital
lease obligation
    
    
    11,928
    
    
    
    
   7




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Notes to Consolidated Financial Statements (unaudited)
  Note 1. Investment Securities
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAt March 31, 2009:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueDebt securities:States and political subdivisions
    
    $
    306,848
    
    
    
    4,571
    
    
    
    (132
    )
    
    
    311,287U.S. Government agencies and government sponsored
enterprises
    
    
    27,467
    
    
    
    47
    
    
    
    (7
    )
    
    
    27,507Corporate
    
    
    3,533
    
    
    
    
    
    
    
    (1,765
    )
    
    
    1,768Total debt securities
    
    
    337,848
    
    
    
    4,618
    
    
    
    (1,904
    )
    
    
    340,562Mortgage-backed securities:Federal National Mortgage Association
    
    
    139,069
    
    
    
    3,906
    
    
    
    (31
    )
    
    
    142,944Federal Home Loan Mortgage Corporation
    
    
    172,055
    
    
    
    7,498
    
    
    
    (9
    )
    
    
    179,544Government National Mortgage Association
    
    
    11,465
    
    
    
    94
    
    
    
    (152
    )
    
    
    11,407Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    
    568,851
    
    
    
    9,682
    
    
    
    (601
    )
    
    
    577,932Federal National Mortgage Association
    
    
    227,443
    
    
    
    4,783
    
    
    
    (960
    )
    
    
    231,266Government National Mortgage Association
    
    
    85,478
    
    
    
    226
    
    
    
    (464
    )
    
    
    85,240Non-Agency issued
    
    
    248,566
    
    
    
    185
    
    
    
    (24,044
    )
    
    
    224,707Total collateralized mortgage obligations
    
    
    1,130,338
    
    
    
    14,876
    
    
    
    (26,069
    )
    
    
    1,119,145Total mortgage-backed securities
    
    
    1,452,927
    
    
    
    26,374
    
    
    
    (26,261
    )
    
    
    1,453,040Asset-backed securities
    
    
    3,441
    
    
    
    
    
    
    
    (149
    )
    
    
    3,292Other
    
    
    5,307
    
    
    
    13
    
    
    
    (1,281
    )
    
    
    4,039Total securities available for sale
    
    $
    1,799,523
    
    
    
    31,005
    
    
    
    (29,595
    )
    
    
    1,800,933
 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAt December 31, 2008:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueDebt securities:States and political subdivisions
    
    $
    295,639
    
    
    
    4,160
    
    
    
    (52
    )
    
    
    299,747U.S. Government agencies and government sponsored
enterprises
    
    
    29,968
    
    
    
    50
    
    
    
    (20
    )
    
    
    29,998Corporate
    
    
    5,028
    
    
    
    1
    
    
    
    (1,589
    )
    
    
    3,440Total debt securities
    
    
    330,635
    
    
    
    4,211
    
    
    
    (1,661
    )
    
    
    333,185Mortgage-backed securities:Federal National Mortgage Association
    
    
    146,646
    
    
    
    2,916
    
    
    
    (300
    )
    
    
    149,262Federal Home Loan Mortgage Corporation
    
    
    182,929
    
    
    
    5,921
    
    
    
    (12
    )
    
    
    188,838Government National Mortgage Association
    
    
    11,711
    
    
    
    64
    
    
    
    (399
    )
    
    
    11,376Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    
    446,086
    
    
    
    4,074
    
    
    
    (69
    )
    
    
    450,091Federal National Mortgage Association
    
    
    179,657
    
    
    
    1,398
    
    
    
    (1,194
    )
    
    
    179,861Government National Mortgage Association
    
    
    24,257
    
    
    
    87
    
    
    
    (404
    )
    
    
    23,940Non-Agency issued
    
    
    263,432
    
    
    
    106
    
    
    
    (34,523
    )
    
    
    229,015Total collateralized mortgage obligations
    
    
    913,432
    
    
    
    5,665
    
    
    
    (36,190
    )
    
    
    882,907Total mortgage-backed securities
    
    
    1,254,718
    
    
    
    14,566
    
    
    
    (36,901
    )
    
    
    1,232,383Asset-backed securities
    
    
    3,499
    
    
    
    
    
    
    
    (122
    )
    
    
    3,377Other
    
    
    5,307
    
    
    
    8
    
    
    
    (1,159
    )
    
    
    4,156Total securities available for sale
    
    $
    1,594,159
    
    
    
    18,785
    
    
    
    (39,843
    )
    
    
    1,573,101
  8




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##### Table of Contents



Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedAt March 31, 2009:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesDebt securities:States and political subdivisions
    
    $
    56,664
    
    
    
    121
    
    
    
    434
    
    
    
    11
    
    
    
    57,098
    
    
    
    132U.S. Government agencies and government
sponsored enterprises
    
    
    10,463
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    10,463
    
    
    
    7Corporate
    
    
    1,265
    
    
    
    969
    
    
    
    253
    
    
    
    796
    
    
    
    1,518
    
    
    
    1,765Total debt securities
    
    
    68,392
    
    
    
    1,097
    
    
    
    687
    
    
    
    807
    
    
    
    69,079
    
    
    
    1,904Mortgage-backed securities:Federal National Mortgage Association
    
    
    437
    
    
    
    2
    
    
    
    1,850
    
    
    
    29
    
    
    
    2,287
    
    
    
    31Federal Home Loan Mortgage Corporation
    
    
    123
    
    
    
    1
    
    
    
    440
    
    
    
    8
    
    
    
    563
    
    
    
    9Government National Mortgage Association
    
    
    
    
    
    
    
    
    
    
    8,664
    
    
    
    152
    
    
    
    8,664
    
    
    
    152Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    
    112,360
    
    
    
    601
    
    
    
    
    
    
    
    
    
    
    
    112,360
    
    
    
    601Federal National Mortgage Association
    
    
    16,906
    
    
    
    960
    
    
    
    
    
    
    
    
    
    
    
    16,906
    
    
    
    960Government National Mortgage
Association
    
    
    52,633
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    52,633
    
    
    
    464Non-Agency issued
    
    
    57,950
    
    
    
    6,728
    
    
    
    156,969
    
    
    
    17,316
    
    
    
    214,919
    
    
    
    24,044Total collateralized mortgage
obligations
    
    
    239,849
    
    
    
    8,753
    
    
    
    156,969
    
    
    
    17,316
    
    
    
    396,818
    
    
    
    26,069Total mortgage-backed securities
    
    
    240,409
    
    
    
    8,756
    
    
    
    167,923
    
    
    
    17,505
    
    
    
    408,332
    
    
    
    26,261Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    3,292
    
    
    
    149
    
    
    
    3,292
    
    
    
    149Other
    
    
    
    
    
    
    
    
    
    
    3,170
    
    
    
    1,281
    
    
    
    3,170
    
    
    
    1,281Total securities available
for sale in an unrealized
loss position
    
    $
    308,801
    
    
    
    9,853
    
    
    
    175,072
    
    
    
    19,742
    
    
    
    483,873
    
    
    
    29,595
 Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedAt December 31, 2008:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesDebt securities:States and political subdivisions
    
    $
    6,116
    
    
    
    48
    
    
    
    379
    
    
    
    4
    
    
    
    6,495
    
    
    
    52U.S. Government agencies and government
sponsored enterprises
    
    
    1,971
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    1,971
    
    
    
    20Corporate
    
    
    1,689
    
    
    
    1,589
    
    
    
    
    
    
    
    
    
    
    
    1,689
    
    
    
    1,589Total debt securities
    
    
    9,776
    
    
    
    1,657
    
    
    
    379
    
    
    
    4
    
    
    
    10,155
    
    
    
    1,661Mortgage-backed securities:Federal National Mortgage Association
    
    
    31,438
    
    
    
    258
    
    
    
    2,282
    
    
    
    42
    
    
    
    33,720
    
    
    
    300Federal Home Loan Mortgage Corporation
    
    
    111
    
    
    
    1
    
    
    
    976
    
    
    
    11
    
    
    
    1,087
    
    
    
    12Government National Mortgage Association
    
    
    9,550
    
    
    
    395
    
    
    
    121
    
    
    
    4
    
    
    
    9,671
    
    
    
    399Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    
    23,318
    
    
    
    29
    
    
    
    3,863
    
    
    
    40
    
    
    
    27,181
    
    
    
    69Federal National Mortgage Association
    
    
    44,695
    
    
    
    1,192
    
    
    
    702
    
    
    
    2
    
    
    
    45,397
    
    
    
    1,194Government National Mortgage Association
    
    
    13,193
    
    
    
    404
    
    
    
    
    
    
    
    
    
    
    
    13,193
    
    
    
    404Non-Agency issued
    
    
    201,193
    
    
    
    33,433
    
    
    
    24,954
    
    
    
    1,090
    
    
    
    226,147
    
    
    
    34,523Total collateralized mortgage obligations
    
    
    282,399
    
    
    
    35,058
    
    
    
    29,519
    
    
    
    1,132
    
    
    
    311,918
    
    
    
    36,190Total mortgage-backed securities
    
    
    323,498
    
    
    
    35,712
    
    
    
    32,898
    
    
    
    1,189
    
    
    
    356,396
    
    
    
    36,901Asset-backed securities
    
    
    3,149
    
    
    
    79
    
    
    
    228
    
    
    
    43
    
    
    
    3,377
    
    
    
    122Other
    
    
    351
    
    
    
    3
    
    
    
    3,297
    
    
    
    1,156
    
    
    
    3,648
    
    
    
    1,159Total securities available
for sale in an unrealized
loss position
    
    $
    336,774
    
    
    
    37,451
    
    
    
    36,802
    
    
    
    2,392
    
    
    
    373,576
    
    
    
    39,843
 Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations
   9




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##### Table of Contents



Non-Agency Collateralized Mortgage Obligations
  Municipal and Corporate Debt Securities and Other
  Note 2. Loans and Leases
  March 31,
    
    
    December 31,2009
    
    
    2008Commercial:Real estate
    
    $
    2,262,505
    
    
    
    2,211,402Construction
    
    
    331,247
    
    
    
    340,564Business
    
    
    969,836
    
    
    
    940,304Specialized lending(1)
    
    
    174,711
    
    
    
    178,916Total commercial loans
    
    
    3,738,299
    
    
    
    3,671,186Residential real estate(2)
    
    
    1,914,691
    
    
    
    1,990,784Home equity
    
    
    629,916
    
    
    
    624,495Other consumer
    
    
    134,689
    
    
    
    143,989Total loans and leases
    
    
    6,417,595
    
    
    
    6,430,454Net deferred costs and unearned discounts
    
    
    31,813
    
    
    
    33,321Allowance for credit losses
    
    
    (79,613
    )
    
    
    (77,793
    )Total loans and leases, net
    
    $
    6,369,795
    
    
    
    6,385,982
 (1)
    
    Includes commercial leases and financed insurance premiums.(2)
    
    Includes $3.6 million and $1.7 million of loans held for sale at March 31, 2009 and
December 31, 2008, respectively.  10




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##### Table of Contents



Three months ended March 31,2009
    
    
    2008Balance at beginning of period
    
    $
    77,793
    
    
    
    70,247Charge-offs
    
    
    (7,305
    )
    
    
    (2,710
    )Recoveries
    
    
    375
    
    
    
    756Provision for credit losses
    
    
    8,750
    
    
    
    3,100Acquired at acquisition date
    
    
    
    
    
    
    2,890Balance at end of period
    
    $
    79,613
    
    
    
    74,283
 Note 3. Mortgage Servicing Rights
  Three months ended March 31,2009
    
    
    2008Balance at beginning of period
    
    $
    4,295
    
    
    
    4,312Additions
    
    
    1,252
    
    
    
    74Amortization
    
    
    (367
    )
    
    
    (130
    )Balance at end of period
    
    $
    5,180
    
    
    
    4,256Valuation allowance
    
    
    (700
    )
    
    
    Mortgage servicing rights, net
    
    $
    4,480
    
    
    
    4,256
  Note 4. Deposits
  March 31,
    
    
    December 31,2009
    
    
    2008Savings
    
    $
    786,535
    
    
    
    788,767Interest-bearing checking
    
    
    503,863
    
    
    
    485,220Money market deposit accounts
    
    
    2,216,321
    
    
    
    1,940,136Noninterest-bearing
    
    
    705,965
    
    
    
    718,593Certificates
    
    
    2,015,412
    
    
    
    2,010,897Total deposits
    
    $
    6,228,096
    
    
    
    5,943,613
  Note 5. Interest Rate Swaps
    11




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##### Table of Contents



Note 6. Stock-Based Compensation
   Note 7. Earnings Per Share
  Three months endedMarch 31,2009
    
    
    2008Numerator for basic and diluted net income per common stock share and
unvested restricted stock award:Net income available to common stockholders
    
    $
    16,074
    
    
    
    18,813Less dividends:Common stockholders
    
    
    16,109
    
    
    
    14,065Unvested restricted stock awards
    
    
    63
    
    
    
    85Total undistributed earnings
    
    $
    (98
    )
    
    
    4,663Common stockholders undistributed earnings  basic
    
    
    (98
    )
    
    
    4,637Unvested restricted stock awards undistributed earnings  basic
    
    
    
    
    
    
    26Total undistributed earnings
    
    $
    (98
    )
    
    
    4,663Numerator for basic net income per common stock share
    
    $
    16,011
    
    
    
    18,702Numerator for basic net income per unvested restricted stock award
    
    $
    63
    
    
    
    111Denominator for basic and diluted net income per common stock share:Weighted average common shares outstanding:Total shares issued
    
    
    125,419
    
    
    
    122,762Unallocated ESOP shares
    
    
    (3,094
    )
    
    
    (3,323
    )Unvested restricted stock awards
    
    
    (461
    )
    
    
    (575
    )Treasury shares
    
    
    (6,809
    )
    
    
    (15,634
    )Total basic weighted average common shares outstanding
    
    
    115,055
    
    
    
    103,230Incremental shares from assumed exercise of stock options
    
    
    150
    
    
    
    221Incremental shares from assumed vesting of restricted stock awards
    
    
    228
    
    
    
    190Total diluted weighted average common shares outstanding
    
    
    115,433
    
    
    
    103,641Denominator for basic and diluted net income per unvested restricted
stock award:Weighted average unvested restricted stock awards outstanding
    
    
    461
    
    
    
    575Basic earnings per share:Common stock share
    
    $
    0.14
    
    
    
    0.18Unvested restricted stock award
    
    $
    0.14
    
    
    
    0.19Diluted earnings per share:Common stock share
    
    $
    0.14
    
    
    
    0.18Unvested restricted stock award
    
    $
    0.14
    
    
    
    0.19Anti-dilutive warrants, stock options, and restricted stock awards
excluded from the diluted weighted average common share calculations
    
    
    2,992
    
    
    
    2,563
  12




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##### Table of Contents



Note 8. Fair Value Measurements
  Level 1 Inputs
 Level 2 Inputs
 Level 3 Inputs
   Assets and Liabilities Measured at Fair Value on a Recurring Basis
 Securities Available for Sale
   Interest Rate Swaps
  Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
 Impaired Loans
  Mortgage Servicing Rights
  Goodwill
   13




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##### Table of Contents



Note 9. Pension and Other Postretirement Plans
    Three months endedMarch 31,2009
    
    
    2008Pension plans:Service cost
    
    $
    48
    
    
    
    Interest cost
    
    
    1,007
    
    
    
    951Expected return on plan assets
    
    
    (739
    )
    
    
    (935
    )Amortization of unrecognized loss
    
    
    315
    
    
    
    Net pension cost
    
    
    631
    
    
    
    16Other postretirement plans:Interest cost
    
    
    127
    
    
    
    142Amortization of unrecognized loss
    
    
    6
    
    
    
    3Amortization of unrecognized prior service liability
    
    
    (16
    )
    
    
    (16
    )Net postretirement cost
    
    $
    117
    
    
    
    129
  14




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##### Table of Contents



Note 10. Segment Information
   Financial
    
    
    ConsolidatedFor the three months ended:
    
    Banking
    
    
    services
    
    
    totalMarch 31, 2009Net interest income
    
    $
    72,630
    
    
    
    
    
    
    
    72,630Provision for credit losses
    
    
    8,750
    
    
    
    
    
    
    
    8,750Net interest income after provision for credit losses
    
    
    63,880
    
    
    
    
    
    
    
    63,880Noninterest income
    
    
    15,894
    
    
    
    12,566
    
    
    
    28,460Amortization of core deposit and other intangibles
    
    
    1,087
    
    
    
    804
    
    
    
    1,891Other noninterest expense
    
    
    51,161
    
    
    
    10,095
    
    
    
    61,256Income before income taxes
    
    
    27,526
    
    
    
    1,667
    
    
    
    29,193Income tax expense
    
    
    9,784
    
    
    
    667
    
    
    
    10,451Net income
    
    $
    17,742
    
    
    
    1,000
    
    
    
    18,742March 31, 2008Net interest income
    
    $
    60,061
    
    
    
    1
    
    
    
    60,062Provision for credit losses
    
    
    3,100
    
    
    
    
    
    
    
    3,100Net interest income after provision for credit losses
    
    
    56,961
    
    
    
    1
    
    
    
    56,962Noninterest income
    
    
    16,466
    
    
    
    12,801
    
    
    
    29,267Amortization of core deposit and other intangibles
    
    
    1,307
    
    
    
    944
    
    
    
    2,251Other noninterest expense
    
    
    44,641
    
    
    
    10,615
    
    
    
    55,256Income before income taxes
    
    
    27,479
    
    
    
    1,243
    
    
    
    28,722Income tax expense
    
    
    9,480
    
    
    
    429
    
    
    
    9,909Net income
    
    $
    17,999
    
    
    
    814
    
    
    
    18,813
 Note 11. Recently Issued Accounting Pronouncements
       15




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##### Table of Contents



Note 12. Subsequent Events
     16




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis is intended to provide greater details of our results of
operations and financial condition and should be read in conjunction with our consolidated
financial statements and the notes thereto included elsewhere in this document. Certain statements
under this caption constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which involve risks and uncertainties. These forward-looking statements relate to, among
other things, expectations of the business environment in which First Niagara Financial Group, Inc.
and its subsidiary operate, projections of future performance and perceived opportunities in the
market. Our actual results may differ significantly from the results, performance, and
achievements expressed or implied in such forward-looking statements. Factors that might cause
such a difference include, but are not limited to, economic conditions, competition in the
geographic and business areas in which we conduct our operations, fluctuation in interest rates,
credit quality and government regulation, and other factors discussed in the annual report on Form
10-K for the year ended December 31, 2008 under Item 1A. Risk Factors. First Niagara Financial
Group, Inc. does not undertake, and specifically disclaims, any obligation to update any
forward-looking statements to reflect the occurrence of events or circumstances after the date of
such statements.
 OVERVIEW
  BUSINESS AND INDUSTRY
    MARKET AREAS AND COMPETITION
    17




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Allowance for Credit Losses
  Investment Securities
   Goodwill
  Income Taxes
    18




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##### Table of Contents



RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2009
 Overview
   
    
    Net interest income increased by $12.6 million, or 21%, primarily due to a
reduction in our funding costs.
 
    
    Yields on our interest bearing liabilities declined 115 basis points to their
lowest quarterly level in almost four years, reflective of the maturation of higher
rate certificates of deposit accounts, the shift in customer preference to lower
rate money market deposit accounts, and a reduction in our wholesale borrowing
costs.
 
    
    Results were impacted by a $1.3 million increase in federal deposit insurance
premiums and the settlement of a service mark infringement matter for $2.8 million,
net of insurance reimbursements.
 Analysis of Financial Condition at March 31, 2009
  
    
    Higher-yielding commercial loans have grown $67.1 million, or 7% annualized,
since December 31, 2008.
 
    
    Deposits increased $284.5 million, or 19% annualized, resulting from seasonal and
new account growth.
 
    
    Residential real estate loans, which we generally do not hold in our portfolio,
decreased $76.1 million since December 31, 2008 due to sales of long-term fixed rate
loans in the secondary market.
 
    
    All of our capital ratios remain above the well-capitalized level.
 Lending Activities
  March 31, 2009
    
    
    December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCommercial:Real estate
    
    $
    2,262,505
    
    
    
    35.3
    %
    
    $
    2,211,402
    
    
    
    34.4
    %Construction
    
    
    331,247
    
    
    
    5.2
    
    
    
    340,564
    
    
    
    5.3Business
    
    
    969,836
    
    
    
    15.1
    
    
    
    940,304
    
    
    
    14.6Specialized lending
    
    
    174,711
    
    
    
    2.7
    
    
    
    178,916
    
    
    
    2.8Total commercial loans
    
    
    3,738,299
    
    
    
    58.3
    
    
    
    3,671,186
    
    
    
    57.1Residential real estate
    
    
    1,914,691
    
    
    
    29.8
    
    
    
    1,990,784
    
    
    
    31.0Home equity
    
    
    629,916
    
    
    
    9.8
    
    
    
    624,495
    
    
    
    9.7Other consumer
    
    
    134,689
    
    
    
    2.1
    
    
    
    143,989
    
    
    
    2.2Total loans and leases
    
    
    6,417,595
    
    
    
    100.0
    %
    
    
    6,430,454
    
    
    
    100.0
    %Net deferred costs and unearned discounts
    
    
    31,813
    
    
    
    
    
    
    
    33,321Allowance for credit losses
    
    
    (79,613
    )
    
    
    
    
    
    
    (77,793
    )Total loans and leases, net
    
    $
    6,369,795
    
    
    
    
    
    
    $
    6,385,982
   19




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##### Table of Contents



Allowance for Credit Losses and Nonperforming Assets
    Three months ended March 31,2009
    
    
    2008Balance at beginning of period
    
    $
    77,793
    
    
    $
    70,247Net charge-offs:Charge-offs
    
    
    (7,305
    )
    
    
    (2,710
    )Recoveries
    
    
    375
    
    
    
    756Net charge-offs
    
    
    (6,930
    )
    
    
    (1,954
    )Acquired at acquisition date
    
    
    
    
    
    
    2,890Provision for credit losses
    
    
    8,750
    
    
    
    3,100Balance at end of period
    
    $
    79,613
    
    
    $
    74,283Ratio of annualized net charge-offs to average loans
outstanding during the period
    
    
    0.44
    %
    
    
    0.13
    %Ratio of annualized provision for credit losses to average
loans outstanding during the period
    
    
    0.55
    %
    
    
    0.21
    %
   March 31,
    
    
    December 31,2009
    
    
    2008Nonaccruing loans:Commercial real estate
    
    $
    33,708
    
    
    $
    26,546Commercial business
    
    
    3,772
    
    
    
    7,411Specialized lending
    
    
    4,728
    
    
    
    4,354Residential real estate
    
    
    6,600
    
    
    
    5,516Home equity
    
    
    2,791
    
    
    
    2,076Other consumer
    
    
    319
    
    
    
    514Total nonaccruing loans
    
    
    51,918
    
    
    
    46,417Real estate owned
    
    
    2,001
    
    
    
    2,001Total nonperforming assets
    
    $
    53,919
    
    
    $
    48,418Total nonaccruing loans as a percentage of total loans
    
    
    0.81
    %
    
    
    0.72
    %Total nonperforming assets as a percentage of total assets
    
    
    0.56
    %
    
    
    0.52
    %Allowance for credit losses to total loans
    
    
    1.23
    %
    
    
    1.20
    %Allowance for credit losses to nonaccruing loans
    
    
    153
    %
    
    
    168
    %
  Investment Securities Portfolio
   20




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##### Table of Contents



Deposits
  March 31, 2009
    
    
    December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCore Deposits:Savings
    
    $
    786,535
    
    
    
    12.6
    %
    
    $
    788,767
    
    
    
    13.3
    %Interest-bearing checking
    
    
    503,863
    
    
    
    8.1
    
    
    
    485,220
    
    
    
    8.2Money market deposit accounts
    
    
    2,216,321
    
    
    
    35.6
    
    
    
    1,940,136
    
    
    
    32.6Noninterest-bearing
    
    
    705,965
    
    
    
    11.3
    
    
    
    718,593
    
    
    
    12.1Total core deposits
    
    
    4,212,684
    
    
    
    67.6
    
    
    
    3,932,716
    
    
    
    66.2Certificates
    
    
    2,015,412
    
    
    
    32.4
    
    
    
    2,010,897
    
    
    
    33.8Total deposits
    
    $
    6,228,096
    
    
    
    100.0
    %
    
    $
    5,943,613
    
    
    
    100.0
    %
  Borrowings
   21




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 Net Interest Income
  Three months ended March 31,2009
    
    
    2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interestoutstanding
    
    
    earned/
    
    
    Yield/
    
    
    outstanding
    
    
    earned/
    
    
    Yield/balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rateInterest-earning assets:Loans and leases(1)
    
    $
    6,450,237
    
    
    $
    87,312
    
    
    
    5.45
    %
    
    $
    6,045,060
    
    
    $
    94,260
    
    
    
    6.25
    %Securities available for sale and
other investments(2)
    
    
    1,774,559
    
    
    
    19,917
    
    
    
    4.49
    
    
    
    1,380,918
    
    
    
    17,526
    
    
    
    5.08Total interest-earning assets
    
    
    8,224,796
    
    
    
    107,229
    
    
    
    5.24
    
    
    
    7,425,978
    
    
    
    111,786
    
    
    
    6.03Noninterest-earning assets(3)(4)
    
    
    1,212,191
    
    
    
    
    
    
    
    
    
    
    
    1,167,805Total assets
    
    $
    9,436,987
    
    
    
    
    
    
    
    
    
    
    $
    8,593,783Interest-bearing liabilities:Savings deposits
    
    $
    774,262
    
    
    
    452
    
    
    
    0.24
    %
    
    $
    782,804
    
    
    $
    646
    
    
    
    0.33
    %Checking deposits
    
    
    486,663
    
    
    
    191
    
    
    
    0.16
    
    
    
    468,411
    
    
    
    383
    
    
    
    0.33Money market deposits
    
    
    2,083,102
    
    
    
    6,969
    
    
    
    1.36
    
    
    
    1,753,468
    
    
    
    12,978
    
    
    
    2.98Certificates of deposit
    
    
    2,012,120
    
    
    
    13,301
    
    
    
    2.68
    
    
    
    2,235,016
    
    
    
    23,101
    
    
    
    4.16Borrowed funds
    
    
    1,507,374
    
    
    
    12,276
    
    
    
    3.29
    
    
    
    1,205,857
    
    
    
    12,817
    
    
    
    4.26Total interest-bearing liabilities
    
    
    6,863,521
    
    
    
    33,189
    
    
    
    1.96
    
    
    
    6,445,556
    
    
    
    49,925
    
    
    
    3.11Noninterest-bearing deposits
    
    
    689,596
    
    
    
    
    
    
    
    
    
    
    
    627,762Other noninterest-bearing liabilities
    
    
    147,734
    
    
    
    
    
    
    
    
    
    
    
    124,934Total liabilities
    
    
    7,700,851
    
    
    
    
    
    
    
    
    
    
    
    7,198,252Stockholders equity(3)
    
    
    1,736,136
    
    
    
    
    
    
    
    
    
    
    
    1,395,531Total liabilities and stockholders
equity
    
    $
    9,436,987
    
    
    
    
    
    
    
    
    
    
    $
    8,593,783Net interest income
    
    
    
    
    
    $
    74,040
    
    
    
    
    
    
    
    
    
    
    $
    61,861Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.28
    %
    
    
    
    
    
    
    
    
    
    
    2.92
    %Net earning assets
    
    $
    1,361,275
    
    
    
    
    
    
    
    
    
    
    $
    980,422Net interest rate margin
    
    
    
    
    
    
    3.61
    %
    
    
    
    
    
    
    
    
    
    
    3.33
    %Ratio of average interest-earning
assets to average interest-bearing liabilities
    
    
    119.83
    %
    
    
    
    
    
    
    
    
    
    
    115.21
    %
 
 (1)
    
    Average outstanding balances are net of deferred costs and net premiums and include
nonperforming loans and loans held for sale.(2)
    
    Average outstanding balances are at amortized cost.(3)
    
    Average outstanding balances include unrealized gains/losses on securities available
for sale.(4)
    
    Average outstanding balances include allowance for credit losses and bank owned life
insurance, earnings from which are reflected in noninterest income.  
    
    Product mix shift in 2008 from maturing higher yielding certificates of deposit accounts
to lower rate money market deposit accounts resulting in a more favorable funding mix in
2009.
 
    
    Increase in average checking deposit balances of $18.3 million, or 16% annualized, as
compared to the first quarter of 2008.
 
    
    Reductions in the federal funds interest rate in late 2008 resulted in funding costs at
their lowest quarterly level in almost four years.
 
    
    Continued shift in our balance sheet mix from lower yielding residential real estate
loans and retail consumer loans to higher yielding commercial loans.
 Provision for Credit Losses
   22




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##### Table of Contents



Noninterest Income
   Noninterest Expense
   Income Taxes
  CAPITAL RESOURCES
       23




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##### Table of Contents



To be well capitalizedMinimum
    
    
    under prompt correctiveActual
    
    
    capital adequacy
    
    
    action provisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTangible capital
    
    $
    738,891
    
    
    
    8.48
    %
    
    
    130,624
    
    
    
    1.50
    %
    
    
    N/A
    
    
    
    N/A
    %Tier 1 (core) capital
    
    
    738,891
    
    
    
    8.48
    
    
    
    348,332
    
    
    
    4.00
    
    
    
    435,414
    
    
    
    5.00Tier 1 risk based capital
    
    
    738,891
    
    
    
    11.53
    
    
    
    256,250
    
    
    
    4.00
    
    
    
    384,375
    
    
    
    6.00Total risk based capital
    
    
    818,033
    
    
    
    12.77
    
    
    
    512,500
    
    
    
    8.00
    
    
    
    640,624
    
    
    
    10.00
   LIQUIDITY
  
    
    Support our operating and investing activities.
 
    
    Meet increases in demand for loans and other assets.
 
    
    Provide for decreases in deposits.
 
    
    Minimize excess balances in lower yielding asset accounts.
         24




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
      Calculated decrease at March 31, 2009Changes in interest rates(1)
    
    Net interest income
    
    
    % Change(in thousands)+200 basis points
    
    $
    (1,043
    )
    
    
    (0.35)
    %+100 basis points
    
    
    (189
    )
    
    
    (0.06
    )
 (1)
    
    The Federal Reserve benchmark overnight federal funds rate was 0.25% at
March 31, 2009, therefore, the calculation of the effect of a decrease in interest rates is not measurable.  25




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##### Table of Contents



ITEM 4. Controls and Procedures
  
 PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  First Niagara Insurance Brokers, Inc. v. First Niagara Financial Group, Inc.,
  
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 a)
    
    Not applicable.b)
    
    Not applicable.c)
    
    We did not repurchase any shares of our common stock during the first quarter of 2009.
 
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
 (a)
    
    Not applicable.(b)
    
    Not applicable.
  26




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##### Table of Contents



ITEM 6. Exhibits
  Exhibits
 31.1
    
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232
    
    
    Certification of Principal Executive Officer and Principal Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
  27




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##### Table of Contents



SIGNATURES
  FIRST NIAGARA FINANCIAL GROUP, INC.Date:  May 8, 2009
    By:
    /s/ John R. KoelmelJohn R. KoelmelPresident and Chief Executive OfficerDate:  May 8, 2009
    By:
    /s/ Michael W. HarringtonMichael W. HarringtonChief Financial Officer  28




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    
    Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
  29