##### 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 June 30, 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
 (Registrants telephone number, including area code)
 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 June 30, 2009
TABLE OF CONTENTS
 Item Number
    
    Page NumberPART I  FINANCIAL INFORMATION1. Financial StatementsConsolidated Statements of Condition as of
June 30, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Income for the 
three and six months ended June 30, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statements of Comprehensive Income for the 
three and six months ended June 30, 2009 and 2008 (unaudited)
    
    
    5Consolidated Statements of Changes in Stockholders Equity for the 
six months ended June 30, 2009 and 2008 (unaudited)
    
    
    6Consolidated Statements of Cash Flows for the 
six months ended June 30, 2009 and 2008 (unaudited)
    
    
    7Notes to Consolidated Financial Statements (unaudited)
    
    
    82. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    203. Quantitative and Qualitative Disclosures about Market Risk
    
    
    294. Controls and Procedures
    
    
    30PART II  OTHER INFORMATION1. Legal Proceedings
    
    
    301A. Risk Factors
    
    
    302. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    303. Defaults Upon Senior Securities
    
    
    304. Submission of Matters to a Vote of Security Holders
    
    
    315. Other Information
    
    
    316. Exhibits
    
    
    31Signatures
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 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 (unaudited)
  June 30,
    
    
    December 31,2009
    
    
    2008AssetsCash and cash equivalents
    
    $
    165,072
    
    
    
    110,552Restricted cash
    
    
    4,000
    
    
    
    3,999Investment securities:Available for sale, at estimated fair value
    
    
    3,339,871
    
    
    
    1,573,101Held to maturity, at amortized cost (estimated fair value of $395,370)
    
    
    398,049
    
    
    
    Loans held for sale
    
    
    34,110
    
    
    
    1,698Loans and leases, net of allowance for credit losses of $82,542 and
$77,793 in 2009 and 2008
    
    
    6,329,729
    
    
    
    6,384,284Bank owned life insurance
    
    
    129,790
    
    
    
    127,151Premises and equipment, net
    
    
    112,105
    
    
    
    95,978Goodwill
    
    
    749,028
    
    
    
    748,971Core deposit and other intangibles, net
    
    
    32,019
    
    
    
    35,578Other assets
    
    
    283,398
    
    
    
    250,060Total assets
    
    $
    11,577,171
    
    
    
    9,331,372Liabilities and Stockholders EquityLiabilities:Deposits
    
    $
    6,240,328
    
    
    
    5,943,613Short-term borrowings
    
    
    2,450,501
    
    
    
    717,464Long-term borrowings
    
    
    742,336
    
    
    
    822,763Other liabilities
    
    
    225,427
    
    
    
    120,269Total liabilities
    
    
    9,658,592
    
    
    
    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 2008
    
    
    
    
    
    
    176,719Common stock, $0.01 par value, 250,000,000 shares authorized;
156,469,261 and 125,419,261 shares issued in 2009 and 2008
    
    
    1,565
    
    
    
    1,254Additional paid-in capital
    
    
    1,684,418
    
    
    
    1,326,159Retained earnings
    
    
    359,838
    
    
    
    369,671Accumulated other comprehensive loss
    
    
    (13,079
    )
    
    
    (29,429
    )Common stock held by ESOP; 2,978,999 and 3,094,365 shares
in 2009 and 2008
    
    
    (23,086
    )
    
    
    (23,843
    )Treasury stock, at cost; 6,706,208 and 6,857,554 shares
in 2009 and 2008
    
    
    (91,077
    )
    
    
    (93,268
    )Total stockholders equity
    
    
    1,918,579
    
    
    
    1,727,263Total liabilities and stockholders equity
    
    $
    11,577,171
    
    
    
    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 ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Interest income:Loans and leases
    
    $
    86,827
    
    
    
    94,801
    
    
    
    173,886
    
    
    
    188,794Investment securities and other
    
    
    23,967
    
    
    
    16,601
    
    
    
    42,727
    
    
    
    32,595Total interest income
    
    
    110,794
    
    
    
    111,402
    
    
    
    216,613
    
    
    
    221,389Interest expense:Deposits
    
    
    18,980
    
    
    
    31,655
    
    
    
    39,893
    
    
    
    68,763Borrowings
    
    
    11,869
    
    
    
    13,138
    
    
    
    24,145
    
    
    
    25,955Total interest expense
    
    
    30,849
    
    
    
    44,793
    
    
    
    64,038
    
    
    
    94,718Net interest income
    
    
    79,945
    
    
    
    66,609
    
    
    
    152,575
    
    
    
    126,671Provision for credit losses
    
    
    8,900
    
    
    
    4,900
    
    
    
    17,650
    
    
    
    8,000Net interest income after provision for credit losses
    
    
    71,045
    
    
    
    61,709
    
    
    
    134,925
    
    
    
    118,671Noninterest income:Banking services
    
    
    10,053
    
    
    
    9,955
    
    
    
    20,023
    
    
    
    19,265Insurance and benefits consulting
    
    
    13,164
    
    
    
    13,129
    
    
    
    25,712
    
    
    
    25,891Wealth management services
    
    
    1,834
    
    
    
    2,860
    
    
    
    4,052
    
    
    
    5,077Lending and leasing
    
    
    2,240
    
    
    
    2,225
    
    
    
    4,224
    
    
    
    4,480Bank owned life insurance
    
    
    1,321
    
    
    
    1,255
    
    
    
    2,630
    
    
    
    2,432Other
    
    
    162
    
    
    
    212
    
    
    
    593
    
    
    
    1,758Total noninterest income
    
    
    28,774
    
    
    
    29,636
    
    
    
    57,234
    
    
    
    58,903Noninterest expense:Salaries and employee benefits
    
    
    35,195
    
    
    
    33,844
    
    
    
    68,432
    
    
    
    67,263Occupancy and equipment
    
    
    6,147
    
    
    
    5,812
    
    
    
    12,613
    
    
    
    12,972Technology and communications
    
    
    5,374
    
    
    
    4,932
    
    
    
    10,427
    
    
    
    9,939Marketing and advertising
    
    
    2,821
    
    
    
    2,462
    
    
    
    5,353
    
    
    
    4,964Professional services
    
    
    2,875
    
    
    
    925
    
    
    
    5,839
    
    
    
    1,997Amortization of core deposit and other intangibles
    
    
    1,847
    
    
    
    2,209
    
    
    
    3,738
    
    
    
    4,460Federal deposit insurance premiums
    
    
    6,980
    
    
    
    246
    
    
    
    8,479
    
    
    
    491Litigation settlement, net
    
    
    
    
    
    
    
    
    
    
    2,845
    
    
    
    Other
    
    
    6,846
    
    
    
    6,164
    
    
    
    13,506
    
    
    
    12,015Total noninterest expense
    
    
    68,085
    
    
    
    56,594
    
    
    
    131,232
    
    
    
    114,101Income before income taxes
    
    
    31,734
    
    
    
    34,751
    
    
    
    60,927
    
    
    
    63,473Income taxes
    
    
    10,934
    
    
    
    11,672
    
    
    
    21,385
    
    
    
    21,581Net income
    
    
    20,800
    
    
    
    23,079
    
    
    
    39,542
    
    
    
    41,892Preferred stock dividend
    
    
    1,431
    
    
    
    
    
    
    
    3,731
    
    
    
    Accretion of preferred stock discount
    
    
    7,947
    
    
    
    
    
    
    
    8,315
    
    
    
    Net income available to common stockholders
    
    $
    11,422
    
    
    
    23,079
    
    
    
    27,496
    
    
    
    41,892Earnings per share:Basic
    
    $
    0.08
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    0.40Diluted
    
    $
    0.08
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    0.40Weighted average common shares outstanding:Basic
    
    
    139,827
    
    
    
    105,884
    
    
    
    127,119
    
    
    
    104,558Diluted
    
    
    140,165
    
    
    
    106,523
    
    
    
    127,485
    
    
    
    105,074Dividends per common share
    
    $
    0.14
    
    
    
    0.14
    
    
    
    0.28
    
    
    
    0.28
   4




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Comprehensive Income (unaudited)
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    20,800
    
    
    
    23,079
    
    
    $
    39,542
    
    
    
    41,892Other comprehensive income (loss), net of income taxes:Securities available for sale:Net unrealized gains (losses) arising during the
period
    
    
    2,212
    
    
    
    (11,863
    )
    
    
    15,779
    
    
    
    (5,987
    )Net unrealized gains on interest rate swaps
    
    
    218
    
    
    
    
    
    
    
    193
    
    
    
    Amortization of net loss related to pension and
post-retirement plans
    
    
    188
    
    
    
    7
    
    
    
    378
    
    
    
    24Total other comprehensive income (loss)
    
    
    2,618
    
    
    
    (11,856
    )
    
    
    16,350
    
    
    
    (5,963
    )Total comprehensive income
    
    $
    23,418
    
    
    
    11,223
    
    
    $
    55,892
    
    
    
    35,929
   5




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,542
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,542Total other comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,350
    
    
    
    
    
    
    
    
    
    
    
    16,350Proceeds from follow-on stock offering,
net of related expenses
    
    
    
    
    
    
    311
    
    
    
    360,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    360,731Preferred stock redemption
    
    
    (184,011
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184,011
    )Repurchase of common stock warrant
    
    
    
    
    
    
    
    
    
    
    (2,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,700
    )ESOP shares committed to be released
    
    
    
    
    
    
    
    
    
    
    430
    
    
    
    
    
    
    
    
    
    
    
    757
    
    
    
    
    
    
    
    1,187Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    2,474
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,474Excess tax expense from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82
    )Exercise of stock options and
restricted stock activity
    
    
    
    
    
    
    
    
    
    
    (2,283
    )
    
    
    (625
    )
    
    
    
    
    
    
    
    
    
    
    2,191
    
    
    
    (717
    )Accretion of preferred stock discount
    
    
    8,315
    
    
    
    
    
    
    
    
    
    
    
    (8,315
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative preferred stock dividend
    
    
    (1,023
    )
    
    
    
    
    
    
    
    
    
    
    (3,731
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,754
    )Common stock dividend of
$0.28 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,704
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,704
    )Balances at June 30, 2009
    
    $
    
    
    
    
    1,565
    
    
    
    1,684,418
    
    
    
    359,838
    
    
    
    (13,079
    )
    
    
    (23,086
    )
    
    
    (91,077
    )
    
    
    1,918,579
 Accumulated
    
    
    CommonAdditional
    
    
    
    
    
    
    other
    
    
    stockPreferred
    
    
    Common
    
    
    paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    held by
    
    
    Treasurystock
    
    
    stock
    
    
    capital
    
    
    earnings
    
    
    loss
    
    
    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, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,892Common stock issued for the
acquisition
of Great Lakes Bancorp, Inc.
    
    
    
    
    
    
    54
    
    
    
    73,728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,782Total other comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,963
    )
    
    
    
    
    
    
    
    
    
    
    (5,963
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,795
    )
    
    
    (6,795
    )ESOP shares committed to be released
    
    
    
    
    
    
    
    
    
    
    542
    
    
    
    
    
    
    
    
    
    
    
    812
    
    
    
    
    
    
    
    1,354Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    2,735
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,735Excess tax benefit from stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142Exercise of stock options and
restricted stock activity
    
    
    
    
    
    
    
    
    
    
    (1,731
    )
    
    
    (859
    )
    
    
    
    
    
    
    
    
    
    
    2,766
    
    
    
    176Common stock dividend of
$0.28 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,033
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,033
    )Balances at June 30, 2008
    
    $
    
    
    
    
    1,254
    
    
    
    1,320,182
    
    
    
    356,539
    
    
    
    (8,567
    )
    
    
    (24,538
    )
    
    
    (213,518
    )
    
    
    1,431,352
   6




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
 
 Consolidated Statements of Cash Flows (unaudited)
  Six months ended June 30,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    39,542
    
    
    
    41,892Adjustments to reconcile net income to net cash provided
by operating activities:Amortization of fees and discounts, net
    
    
    7,606
    
    
    
    3,255Provision for credit losses
    
    
    17,650
    
    
    
    8,000Depreciation of premises and equipment
    
    
    6,190
    
    
    
    5,460Asset writedowns
    
    
    1,549
    
    
    
    890Amortization of core deposit and other intangibles
    
    
    3,738
    
    
    
    4,460Originations of loans held for sale
    
    
    (242,621
    )
    
    
    (46,704
    )Proceeds from sales of loans held for sale
    
    
    207,905
    
    
    
    46,146Loss (gain) on sale of loans
    
    
    2,304
    
    
    
    (102
    )ESOP and stock-based compensation expense
    
    
    3,661
    
    
    
    4,199Deferred income tax expense (benefit)
    
    
    1,281
    
    
    
    (85
    )Income from bank owned life insurance
    
    
    (2,630
    )
    
    
    (2,432
    )Net increase in other assets
    
    
    (17,378
    )
    
    
    (3,569
    )Net increase in other liabilities
    
    
    6,414
    
    
    
    1,147Net cash provided by operating activities
    
    
    35,211
    
    
    
    62,557Cash flows from investing activities:Proceeds from maturities of securities available for sale
    
    
    129,308
    
    
    
    156,287Proceeds from sale of securities available for sale
    
    
    995
    
    
    
    Principal payments received on securities available for sale
    
    
    237,576
    
    
    
    108,268Purchases of securities available for sale
    
    
    (2,024,463
    )
    
    
    (127,406
    )Principal payments received on securities held to maturity
    
    
    1,648
    
    
    
    Purchases of securities held to maturity
    
    
    (400,062
    )
    
    
    Net decrease (increase) in loans and leases
    
    
    31,494
    
    
    
    (173,526
    )Acquisitions, net of cash and cash equivalents
    
    
    (237
    )
    
    
    (84,445
    )Other, net
    
    
    (39,530
    )
    
    
    (8,510
    )Net cash used in investing activities
    
    
    (2,063,271
    )
    
    
    (129,332
    )Cash flows from financing activities:Net increase in deposits
    
    
    296,415
    
    
    
    16,013Proceeds from (repayments of) short-term borrowings, net
    
    
    1,658,454
    
    
    
    (48,346
    )Proceeds from long-term borrowings
    
    
    
    
    
    
    190,000Repayments of long-term borrowings
    
    
    (4,821
    )
    
    
    (9,199
    )Proceeds from exercise of stock options
    
    
    51
    
    
    
    394Excess tax (expense) benefit from stock-based compensation
    
    
    (82
    )
    
    
    142Issuance of common stock in follow-on stock offering, net
    
    
    360,731
    
    
    
    Repurchase of common stock warrant
    
    
    (2,700
    )
    
    
    Redemption of preferred stock
    
    
    (184,011
    )
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    (6,795
    )Dividends paid on cumulative preferred stock
    
    
    (4,754
    )
    
    
    Dividends paid on common stock
    
    
    (36,702
    )
    
    
    (29,033
    )Net cash provided by financing activities
    
    
    2,082,581
    
    
    
    113,176Net increase in cash and cash equivalents
    
    
    54,521
    
    
    
    46,401Cash and cash equivalents at beginning of period
    
    
    114,551
    
    
    
    114,991Cash and cash equivalents at end of period
    
    $
    169,072
    
    
    
    161,392Cash paid during the period for:Income taxes
    
    $
    22,663
    
    
    
    23,609Interest expense
    
    
    64,792
    
    
    
    94,178Acquisition of noncash assets and liabilities:Assets acquired
    
    
    237
    
    
    
    902,067Liabilities assumed
    
    
    
    
    
    
    743,841Loans transferred to other real estate owned
    
    
    4,606
    
    
    
    1,328Securities available for sale purchased not settled
    
    
    86,903
    
    
    
    7,778Capital 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. Pending Acquisitions
 National City Bank branches
   Harleysville National Corporation
   8




---



##### Table of Contents



Note 2. Investment Securities
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAt June 30, 2009:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    373,697
    
    
    
    4,789
    
    
    
    (56
    )
    
    
    378,430U.S. Government agencies and government sponsored enterprises
    
    
    239,120
    
    
    
    132
    
    
    
    (105
    )
    
    
    239,147Corporate
    
    
    3,377
    
    
    
    
    
    
    
    (1,380
    )
    
    
    1,997Total debt securities
    
    
    616,194
    
    
    
    4,921
    
    
    
    (1,541
    )
    
    
    619,574Mortgage-backed securities:Federal National Mortgage Association
    
    
    130,701
    
    
    
    3,969
    
    
    
    (27
    )
    
    
    134,643Federal Home Loan Mortgage Corporation
    
    
    156,856
    
    
    
    6,375
    
    
    
    (10
    )
    
    
    163,221Government National Mortgage Association
    
    
    31,989
    
    
    
    124
    
    
    
    (604
    )
    
    
    31,509Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    
    643,194
    
    
    
    10,889
    
    
    
    (1,491
    )
    
    
    652,592Federal National Mortgage Association
    
    
    572,470
    
    
    
    6,774
    
    
    
    (1,118
    )
    
    
    578,126Government National Mortgage Association
    
    
    938,317
    
    
    
    2,379
    
    
    
    (4,543
    )
    
    
    936,153Non-Agency issued
    
    
    236,384
    
    
    
    650
    
    
    
    (20,291
    )
    
    
    216,743Total collateralized mortgage obligations
    
    
    2,390,365
    
    
    
    20,692
    
    
    
    (27,443
    )
    
    
    2,383,614Total mortgage-backed securities
    
    
    2,709,911
    
    
    
    31,160
    
    
    
    (28,084
    )
    
    
    2,712,987Asset-backed securities
    
    
    3,385
    
    
    
    
    
    
    
    (129
    )
    
    
    3,256Other
    
    
    5,307
    
    
    
    12
    
    
    
    (1,265
    )
    
    
    4,054Total securities available for sale
    
    $
    3,334,797
    
    
    
    36,093
    
    
    
    (31,019
    )
    
    
    3,339,871Investment securities held to maturity:Mortgage-backed securities:Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    $
    144,216
    
    
    
    5
    
    
    
    (190
    )
    
    
    144,031Federal National Mortgage Association
    
    
    102,303
    
    
    
    
    
    
    
    (325
    )
    
    
    101,978Government National Mortgage Association
    
    
    151,530
    
    
    
    
    
    
    
    (2,169
    )
    
    
    149,361Total securities held to maturity
    
    $
    398,049
    
    
    
    5
    
    
    
    (2,684
    )
    
    
    395,370
 Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAt December 31, 2008:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueInvestment securities available for sale:Debt 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
  9




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##### Table of Contents



Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedAt June 30, 2009:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    27,959
    
    
    
    46
    
    
    
    297
    
    
    
    10
    
    
    
    28,256
    
    
    
    56U.S. Government agencies and government sponsored enterprises
    
    
    211,895
    
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    211,895
    
    
    
    105Corporate
    
    
    
    
    
    
    
    
    
    
    1,747
    
    
    
    1,380
    
    
    
    1,747
    
    
    
    1,380Total debt securities
    
    
    239,854
    
    
    
    151
    
    
    
    2,044
    
    
    
    1,390
    
    
    
    241,898
    
    
    
    1,541Mortgage-backed securities:Federal National Mortgage Association
    
    
    561
    
    
    
    1
    
    
    
    1,715
    
    
    
    26
    
    
    
    2,276
    
    
    
    27Federal Home Loan Mortgage Corporation
    
    
    93
    
    
    
    1
    
    
    
    440
    
    
    
    9
    
    
    
    533
    
    
    
    10Government National Mortgage Association
    
    
    20,290
    
    
    
    450
    
    
    
    8,529
    
    
    
    154
    
    
    
    28,819
    
    
    
    604Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    
    177,715
    
    
    
    1,491
    
    
    
    
    
    
    
    
    
    
    
    177,715
    
    
    
    1,491Federal National Mortgage Association
    
    
    168,387
    
    
    
    1,118
    
    
    
    
    
    
    
    
    
    
    
    168,387
    
    
    
    1,118Government National Mortgage Association
    
    
    533,053
    
    
    
    4,543
    
    
    
    
    
    
    
    
    
    
    
    533,053
    
    
    
    4,543Non-Agency issued
    
    
    24,734
    
    
    
    2,017
    
    
    
    179,936
    
    
    
    18,274
    
    
    
    204,670
    
    
    
    20,291Total collateralized mortgage obligations
    
    
    903,889
    
    
    
    9,169
    
    
    
    179,936
    
    
    
    18,274
    
    
    
    1,083,825
    
    
    
    27,443Total mortgage-backed securities
    
    
    924,833
    
    
    
    9,621
    
    
    
    190,620
    
    
    
    18,463
    
    
    
    1,115,453
    
    
    
    28,084Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    3,256
    
    
    
    129
    
    
    
    3,256
    
    
    
    129Other
    
    
    
    
    
    
    
    
    
    
    3,188
    
    
    
    1,265
    
    
    
    3,188
    
    
    
    1,265Total securities available for sale in an unrealized loss position
    
    $
    1,164,687
    
    
    
    9,772
    
    
    
    199,108
    
    
    
    21,247
    
    
    
    1,363,795
    
    
    
    31,019Investment securities held to maturity:Mortgage-backed securities:Collateralized mortgage obligations:Federal Home Loan Mortgage Corporation
    
    $
    92,927
    
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    92,927
    
    
    
    190Federal National Mortgage Association
    
    
    101,978
    
    
    
    325
    
    
    
    
    
    
    
    
    
    
    
    101,978
    
    
    
    325Government National Mortgage Association
    
    
    149,361
    
    
    
    2,169
    
    
    
    
    
    
    
    
    
    
    
    149,361
    
    
    
    2,169Total securities held to maturity in an unrealized loss position
    
    $
    344,266
    
    
    
    2,684
    
    
    
    
    
    
    
    
    
    
    
    344,266
    
    
    
    2,684
 Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedAt December 31, 2008:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesSecurities available for sale:Debt 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
  10




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##### Table of Contents



Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations
   Non-Agency Collateralized Mortgage Obligations
   Municipal and Corporate Debt Securities and Other
   Available for sale
    
    
    Held to maturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Faircost
    
    
    value
    
    
    cost
    
    
    valueDebt securities:Within one year
    
    $
    438,802
    
    
    
    440,088
    
    
    $
    
    
    
    
    After one year through five years
    
    
    159.708
    
    
    
    162,773
    
    
    
    
    
    
    
    After five years through ten years
    
    
    12,969
    
    
    
    13,208
    
    
    
    
    
    
    
    After ten years
    
    
    4,715
    
    
    
    3,505
    
    
    
    
    
    
    
    Total debt securities
    
    
    616,194
    
    
    
    619,574
    
    
    
    
    
    
    
    Asset-backed securities
    
    
    3,385
    
    
    
    3,256
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    2,709,911
    
    
    
    2,712,987
    
    
    
    398,049
    
    
    
    395,370Other
    
    
    5,307
    
    
    
    4,054
    
    
    
    
    
    
    
    $
    3,334,797
    
    
    
    3,339,871
    
    
    $
    398,049
    
    
    
    395,370
  11




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##### Table of Contents



Note 3. Loans and Leases
  June 30,
    
    
    December 31,2009
    
    
    2008Commercial:Real estate
    
    $
    2,353,167
    
    
    
    2,211,402Construction
    
    
    303,483
    
    
    
    340,564Business
    
    
    983,913
    
    
    
    940,304Specialized lending(1)
    
    
    182,297
    
    
    
    178,916Total commercial loans
    
    
    3,822,860
    
    
    
    3,671,186Residential real estate(2)
    
    
    1,815,041
    
    
    
    1,990,784Home equity
    
    
    647,878
    
    
    
    624,495Other consumer
    
    
    129,738
    
    
    
    143,989Total loans and leases
    
    
    6,415,517
    
    
    
    6,430,454Net deferred costs and unearned discounts
    
    
    30,864
    
    
    
    33,321Allowance for credit losses
    
    
    (82,542
    )
    
    
    (77,793
    )Total loans and leases, net
    
    $
    6,363,839
    
    
    
    6,385,982
 (1)
    
    Includes commercial leases and financed insurance premiums.(2)
    
    Includes $34.1 million and $1.7 million of loans held for sale at June 30, 2009
and December 31, 2008, respectively.  Six months ended June 30,2009
    
    
    2008Balance at beginning of period
    
    $
    77,793
    
    
    
    70,247Charge-offs
    
    
    (13,784
    )
    
    
    (7,243
    )Recoveries
    
    
    883
    
    
    
    1,234Provision for credit losses
    
    
    17,650
    
    
    
    8,000Acquired at acquisition date
    
    
    
    
    
    
    2,890Balance at end of period
    
    $
    82,542
    
    
    
    75,128
  2009
    
    
    2008Nonaccrual loans
    
    $
    52,297
    
    
    
    34,393Interest income that would have been recorded if loans had
been performing in accordance with original terms
    
    
    257
    
    
    
    346Balance of impaired loans
    
    
    44,399
    
    
    
    21,806Allowance relating to impaired loans included in allowance
for credit losses
    
    
    4,342
    
    
    
    4,395Aggregate recorded investment of impaired loans with terms
modified through a troubled debt restructuring
    
    
    16,848
    
    
    
    7,821
   12




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##### Table of Contents



Note 4. Mortgage Servicing Rights
  Six months ended June 30,2009
    
    
    2008Balance at beginning of period
    
    $
    4,295
    
    
    
    4,312Additions
    
    
    2,406
    
    
    
    275Amortization
    
    
    (845
    )
    
    
    (308
    )Balance at end of period
    
    
    5,856
    
    
    
    4,279Valuation allowance
    
    
    (1,387
    )
    
    
    Mortgage servicing rights, net
    
    $
    4,469
    
    
    
    4,279
   Note 5. Deposits
  June 30,
    
    
    December 31,2009
    
    
    2008Savings
    
    $
    805,646
    
    
    
    788,767Interest-bearing checking
    
    
    522,977
    
    
    
    485,220Money market deposit accounts
    
    
    2,375,493
    
    
    
    1,940,136Noninterest-bearing
    
    
    761,160
    
    
    
    718,593Certificates
    
    
    1,775,052
    
    
    
    2,010,897Total deposits
    
    $
    6,240,328
    
    
    
    5,943,613
  Note 6. Interest Rate Swaps
    13




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##### Table of Contents



Note 7. Capital
    Note 8. Earnings Per Share
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator for basic and diluted net income per common stock share:Net income available to common stockholders
    
    $
    11,422
    
    
    
    23,079
    
    
    
    27,496
    
    
    
    41,892Less dividends:Common stockholders
    
    
    20,477
    
    
    
    14,805
    
    
    
    36,586
    
    
    
    28,871Unvested restricted stock awards
    
    
    55
    
    
    
    78
    
    
    
    118
    
    
    
    162Total (overdistributed) undistributed earnings
    
    
    (9,110
    )
    
    
    8,196
    
    
    
    (9,208
    )
    
    
    12,859Common stockholders (overdistributed) undistributed earnings  basic
    
    
    (9,084
    )
    
    
    8,153
    
    
    
    (9,177
    )
    
    
    12,790Unvested restricted stock awards (overdistributed) undistributed earnings  basic
    
    
    (26
    )
    
    
    43
    
    
    
    (31
    )
    
    
    69Total (overdistributed) undistributed earnings
    
    
    (9,110
    )
    
    
    8,196
    
    
    
    (9,208
    )
    
    
    12,859Numerator for basic net income per common stock share
    
    $
    11,393
    
    
    
    22,958
    
    
    
    27,409
    
    
    
    41,661Denominator for basic and diluted net income per common stock share:Weighted average common shares outstanding:Total shares issued
    
    
    149,986
    
    
    
    125,419
    
    
    
    137,380
    
    
    
    124,090Unallocated ESOP shares
    
    
    (3,036
    )
    
    
    (3,260
    )
    
    
    (3,065
    )
    
    
    (3,292
    )Unvested restricted stock awards
    
    
    (409
    )
    
    
    (562
    )
    
    
    (435
    )
    
    
    (566
    )Treasury shares
    
    
    (6,714
    )
    
    
    (15,713
    )
    
    
    (6,761
    )
    
    
    (15,674
    )Total basic weighted average common shares outstanding
    
    
    139,827
    
    
    
    105,884
    
    
    
    127,119
    
    
    
    104,558Incremental shares from assumed exercise of stock options
    
    
    135
    
    
    
    409
    
    
    
    143
    
    
    
    300Incremental shares from assumed vesting of restricted stock awards
    
    
    203
    
    
    
    230
    
    
    
    223
    
    
    
    216Total diluted weighted average common shares outstanding
    
    
    140,165
    
    
    
    106,523
    
    
    
    127,485
    
    
    
    105,074Basic earnings per common share
    
    $
    0.08
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    0.40Diluted earnings per common share
    
    $
    0.08
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    0.40Anti-dilutive stock options and restricted stock awards excluded from the diluted
weighted average common share calculations
    
    
    2,733
    
    
    
    748
    
    
    
    2,659
    
    
    
    1,457
 Note 9. Fair Value Measurements
  Level 1 Inputs
 Level 2 Inputs
 Level 3 Inputs
  14




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##### Table of Contents



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
  Real Estate Owned
   15




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##### Table of Contents



Note 10. Fair Value of Financial Instruments
  Estimated fairCarrying value
    
    
    valueFinancial assets:Cash and cash equivalents
    
    $
    169,072
    
    
    
    169,072Investment securities available for sale
    
    
    3,339,871
    
    
    
    3,339,871Investment securities held to maturity
    
    
    398,049
    
    
    
    395,370Loans and leases, net(1)
    
    
    6,363,839
    
    
    
    6,529,248FHLB stock
    
    
    90,983
    
    
    
    90,983Accrued interest receivable
    
    
    38,734
    
    
    
    38,734Financial liabilities:Deposits
    
    $
    6,240,328
    
    
    
    6,246,057Borrowings
    
    
    3,192,837
    
    
    
    3,026,900Accrued interest payable
    
    
    9,867
    
    
    
    9,867
 (1)
    
    Included in loans and leases, net are residential mortgage loans
held for sale with a carrying value of $34.1 million and a fair value of $36.9
million at June 30, 2009.   Cash and Cash Equivalents
  Investment Securities
  Loans and Leases
   FHLB Stock
  Accrued Interest Receivable
  Deposits
  Borrowings
   16




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##### Table of Contents



Accrued Interest Payable
  Commitments
  Note 11. Pension and Other Postretirement Plans
    Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Pension plans:Service cost
    
    $
    48
    
    
    
    
    
    
    
    96
    
    
    
    Interest cost
    
    
    1,007
    
    
    
    950
    
    
    
    2,014
    
    
    
    1,901Expected return on plan assets
    
    
    (739
    )
    
    
    (935
    )
    
    
    (1,478
    )
    
    
    (1,870
    )Amortization of unrecognized loss
    
    
    315
    
    
    
    
    
    
    
    630
    
    
    
    Net pension cost
    
    $
    631
    
    
    
    15
    
    
    
    1,262
    
    
    
    31Other postretirement plans:Interest cost
    
    $
    127
    
    
    
    141
    
    
    
    254
    
    
    
    283Amortization of unrecognized loss
    
    
    6
    
    
    
    3
    
    
    
    12
    
    
    
    6Amortization of unrecognized prior service liability
    
    
    (16
    )
    
    
    (16
    )
    
    
    (32
    )
    
    
    (32
    )Net postretirement cost
    
    $
    117
    
    
    
    128
    
    
    
    234
    
    
    
    257
  17




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##### Table of Contents



Note 12. Segment Information
   Financial
    
    
    ConsolidatedFor the three months ended:
    
    Banking
    
    
    services
    
    
    totalJune 30, 2009Net interest income
    
    $
    79,945
    
    
    
    
    
    
    
    79,945Provision for credit losses
    
    
    8,900
    
    
    
    
    
    
    
    8,900Net interest income after provision for credit losses
    
    
    71,045
    
    
    
    
    
    
    
    71,045Noninterest income
    
    
    15,544
    
    
    
    13,230
    
    
    
    28,774Amortization of core deposit and other intangibles
    
    
    1,047
    
    
    
    800
    
    
    
    1,847Other noninterest expense
    
    
    55,861
    
    
    
    10,377
    
    
    
    66,238Income before income taxes
    
    
    29,681
    
    
    
    2,053
    
    
    
    31,734Income tax expense
    
    
    10,113
    
    
    
    821
    
    
    
    10,934Net income
    
    $
    19,568
    
    
    
    1,232
    
    
    
    20,800June 30, 2008Net interest income
    
    $
    66,609
    
    
    
    
    
    
    
    66,609Provision for credit losses
    
    
    4,900
    
    
    
    
    
    
    
    4,900Net interest income after provision for credit losses
    
    
    61,709
    
    
    
    
    
    
    
    61,709Noninterest income
    
    
    16,478
    
    
    
    13,158
    
    
    
    29,636Amortization of core deposit and other intangibles
    
    
    1,277
    
    
    
    932
    
    
    
    2,209Other noninterest expense
    
    
    43,769
    
    
    
    10,616
    
    
    
    54,385Income before income taxes
    
    
    33,141
    
    
    
    1,610
    
    
    
    34,751Income tax expense
    
    
    11,132
    
    
    
    540
    
    
    
    11,672Net income
    
    $
    22,009
    
    
    
    1,070
    
    
    
    23,079
 Financial
    
    
    ConsolidatedFor the six months ended:
    
    Banking
    
    
    services
    
    
    totalJune 30, 2009Net interest income
    
    $
    152,575
    
    
    
    
    
    
    
    152,575Provision for credit losses
    
    
    17,650
    
    
    
    
    
    
    
    17,650Net interest income after provision for credit losses
    
    
    134,925
    
    
    
    
    
    
    
    134,925Noninterest income
    
    
    31,438
    
    
    
    25,796
    
    
    
    57,234Amortization of core deposit and other intangibles
    
    
    2,134
    
    
    
    1,604
    
    
    
    3,738Other noninterest expense
    
    
    107,022
    
    
    
    20,472
    
    
    
    127,494Income before income taxes
    
    
    57,207
    
    
    
    3,720
    
    
    
    60,927Income tax expense
    
    
    19,897
    
    
    
    1,488
    
    
    
    21,385Net income
    
    $
    37,310
    
    
    
    2,232
    
    
    
    39,542June 30, 2008Net interest income
    
    $
    126,670
    
    
    
    1
    
    
    
    126,671Provision for credit losses
    
    
    8,000
    
    
    
    
    
    
    
    8,000Net interest income after provision for credit losses
    
    
    118,670
    
    
    
    1
    
    
    
    118,671Noninterest income
    
    
    32,944
    
    
    
    25,959
    
    
    
    58,903Amortization of core deposit and other intangibles
    
    
    2,584
    
    
    
    1,876
    
    
    
    4,460Other noninterest expense
    
    
    88,476
    
    
    
    21,165
    
    
    
    109,641Income before income taxes
    
    
    60,554
    
    
    
    2,919
    
    
    
    63,473Income tax expense
    
    
    20,588
    
    
    
    993
    
    
    
    21,581Net income
    
    $
    39,966
    
    
    
    1,926
    
    
    
    41,892
 Note 13. Recently Issued Accounting Pronouncements
   18




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19




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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
    20




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Allowance for Credit Losses
  Investment Securities
    Goodwill
  Income Taxes
    21




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##### Table of Contents



RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2009
 Overview
    Analysis of Financial Condition at June 30, 2009
  
    
    Higher-yielding commercial loans increased $151.7 million, or 8% annualized,
since December 31, 2008.
 
    
    Core deposits increased $532.6 million, or 27% annualized, across retail,
commercial, and municipal customers.
 
    
    Higher cost certificate of deposit account balances decreased $235.8 million, or
24% annualized, as we executed our strategy of letting higher priced certificate of
deposits run off and focused on building our lower cost relationship based deposit
customers.
 Lending Activities
  June 30, 2009
    
    
    December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCommercial:Real estate
    
    $
    2,353,167
    
    
    
    36.7
    %
    
    $
    2,211,402
    
    
    
    34.4
    %Construction
    
    
    303,483
    
    
    
    4.7
    
    
    
    340,564
    
    
    
    5.3Business
    
    
    983,913
    
    
    
    15.3
    
    
    
    940,304
    
    
    
    14.6Specialized lending
    
    
    182,297
    
    
    
    2.9
    
    
    
    178,916
    
    
    
    2.8Total commercial loans
    
    
    3,822,860
    
    
    
    59.6
    
    
    
    3,671,186
    
    
    
    57.1Residential real estate(1)
    
    
    1,815,041
    
    
    
    28.3
    
    
    
    1,990,784
    
    
    
    31.0Home equity
    
    
    647,878
    
    
    
    10.1
    
    
    
    624,495
    
    
    
    9.7Other consumer
    
    
    129,738
    
    
    
    2.0
    
    
    
    143,989
    
    
    
    2.2Total loans and leases
    
    
    6,415,517
    
    
    
    100.0
    %
    
    
    6,430,454
    
    
    
    100.0
    %Net deferred costs and unearned discounts
    
    
    30,864
    
    
    
    
    
    
    
    33,321Allowance for credit losses
    
    
    (82,542
    )
    
    
    
    
    
    
    (77,793
    )Total loans and leases, net
    
    $
    6,363,839
    
    
    
    
    
    
    $
    6,385,982
 (1)
    
    Includes $34.1 million and $1.7 million of loans held for sale at June 30, 2009
and December 31, 2008, respectively.   22




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##### Table of Contents



Allowance for Credit Losses and Nonperforming Assets
    Six months ended June 30,2009
    
    
    2008Balance at beginning of period
    
    $
    77,793
    
    
    $
    70,247Net charge-offs:Charge-offs
    
    
    (13,784
    )
    
    
    (7,243
    )Recoveries
    
    
    883
    
    
    
    1,234Net charge-offs
    
    
    (12,901
    )
    
    
    (6,009
    )Acquired at acquisition date
    
    
    
    
    
    
    2,890Provision for credit losses
    
    
    17,650
    
    
    
    8,000Balance at end of period
    
    $
    82,542
    
    
    $
    75,128Ratio of annualized net charge-offs to average loans
outstanding during the period
    
    
    0.40
    %
    
    
    0.19
    %Ratio of annualized provision for credit losses to average
loans outstanding during the period
    
    
    0.55
    %
    
    
    0.26
    %
   June 30,
    
    
    December 31,2009
    
    
    2008Nonaccruing loans:Commercial real estate
    
    $
    32,648
    
    
    $
    26,546Commercial business
    
    
    4,542
    
    
    
    7,411Specialized lending
    
    
    3,609
    
    
    
    4,354Residential real estate
    
    
    8,030
    
    
    
    5,516Home equity
    
    
    2,714
    
    
    
    2,076Other consumer
    
    
    754
    
    
    
    514Total nonaccruing loans
    
    
    52,297
    
    
    
    46,417Real estate owned
    
    
    5,758
    
    
    
    2,001Total nonperforming assets
    
    $
    58,055
    
    
    $
    48,418Total nonaccruing loans as a percentage of total loans
    
    
    0.81
    %
    
    
    0.72
    %Total nonperforming assets as a percentage of total
assets
    
    
    0.50
    %
    
    
    0.52
    %Allowance for credit losses to total loans
    
    
    1.28
    %
    
    
    1.20
    %Allowance for credit losses to nonaccruing loans
    
    
    158
    %
    
    
    168
    %
   23




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##### Table of Contents



Investment Securities Portfolio
     Deposits
  June 30, 2009
    
    
    December 31, 2008Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCore Deposits:Savings
    
    $
    805,646
    
    
    
    12.9
    %
    
    $
    788,767
    
    
    
    13.3
    %Interest-bearing checking
    
    
    522,977
    
    
    
    8.4
    
    
    
    485,220
    
    
    
    8.2Money market deposit accounts
    
    
    2,375,493
    
    
    
    38.1
    
    
    
    1,940,136
    
    
    
    32.6Noninterest-bearing
    
    
    761,160
    
    
    
    12.2
    
    
    
    718,593
    
    
    
    12.1Total core deposits
    
    
    4,465,276
    
    
    
    71.6
    
    
    
    3,932,716
    
    
    
    66.2Certificates
    
    
    1,775,052
    
    
    
    28.4
    
    
    
    2,010,897
    
    
    
    33.8Total deposits
    
    $
    6,240,328
    
    
    
    100.0
    %
    
    $
    5,943,613
    
    
    
    100.0
    %
  Borrowings
   24




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 Net Interest Income
  Three months ended June 30,2009
    
    
    2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interestoutstanding
    
    
    earned/
    
    
    Yield/
    
    
    outstanding
    
    
    earned/
    
    
    Yield/balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rateInterest-earning assets:Loans and leases(1)
    
    $
    6,436,686
    
    
    $
    87,078
    
    
    
    5.42
    %
    
    $
    6,394,880
    
    
    $
    95,066
    
    
    
    5.96
    %Securities and other investments(2)
    
    
    2,540,154
    
    
    
    25,109
    
    
    
    3.95
    
    
    
    1,410,912
    
    
    
    18,021
    
    
    
    5.11Total interest-earning assets
    
    
    8,976,840
    
    
    
    112,187
    
    
    
    5.00
    
    
    
    7,805,792
    
    
    
    113,087
    
    
    
    5.81Noninterest-earning assets(3)(4)
    
    
    1,280,328
    
    
    
    
    
    
    
    
    
    
    
    1,310,110Total assets
    
    $
    10,257,168
    
    
    
    
    
    
    
    
    
    
    $
    9,115,902Interest-bearing liabilities:Savings deposits
    
    $
    797,431
    
    
    
    478
    
    
    
    0.24
    %
    
    $
    804,834
    
    
    $
    547
    
    
    
    0.27
    %Checking deposits
    
    
    510,064
    
    
    
    190
    
    
    
    0.15
    
    
    
    494,395
    
    
    
    366
    
    
    
    0.30Money market deposits
    
    
    2,323,823
    
    
    
    6,825
    
    
    
    1.18
    
    
    
    1,932,942
    
    
    
    10,892
    
    
    
    2.27Certificates of deposit
    
    
    1,914,353
    
    
    
    11,487
    
    
    
    2.41
    
    
    
    2,249,847
    
    
    
    19,850
    
    
    
    3.55Borrowed funds
    
    
    1,845,462
    
    
    
    11,869
    
    
    
    2.57
    
    
    
    1,309,847
    
    
    
    13,138
    
    
    
    4.02Total interest-bearing liabilities
    
    
    7,391,133
    
    
    
    30,849
    
    
    
    1.67
    
    
    
    6,791,865
    
    
    
    44,793
    
    
    
    2.65Noninterest-bearing deposits
    
    
    743,102
    
    
    
    
    
    
    
    
    
    
    
    688,403Other noninterest-bearing liabilities
    
    
    157,130
    
    
    
    
    
    
    
    
    
    
    
    199,475Total liabilities
    
    
    8,291,365
    
    
    
    
    
    
    
    
    
    
    
    7,679,743Stockholders equity(3)
    
    
    1,965,803
    
    
    
    
    
    
    
    
    
    
    
    1,436,159Total liabilities and stockholders
equity
    
    $
    10,257,168
    
    
    
    
    
    
    
    
    
    
    $
    9,115,902Net interest income
    
    
    
    
    
    $
    81,338
    
    
    
    
    
    
    
    
    
    
    $
    68,294Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.33
    %
    
    
    
    
    
    
    
    
    
    
    3.16
    %Net earning assets
    
    $
    1,585,707
    
    
    
    
    
    
    
    
    
    
    $
    1,013,927Net interest rate margin
    
    
    
    
    
    
    3.63
    %
    
    
    
    
    
    
    
    
    
    
    3.50
    %Ratio of average interest-earning
assets to average interest-bearing liabilities
    
    
    121.45
    %
    
    
    
    
    
    
    
    
    
    
    114.93
    %
  25




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##### Table of Contents



Six months ended June 30,2009
    
    
    2008Average
    
    
    Interest
    
    
    
    
    
    
    Average
    
    
    Interestoutstanding
    
    
    earned/
    
    
    Yield/
    
    
    outstanding
    
    
    earned/
    
    
    Yield/balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rateInterest-earning assets:Loans and leases(1)
    
    $
    6,443,424
    
    
    $
    174,390
    
    
    
    5.43
    %
    
    $
    6,219,970
    
    
    $
    189,326
    
    
    
    6.10
    %Securities and other investments(2)
    
    
    2,159,471
    
    
    
    45,023
    
    
    
    4.17
    
    
    
    1,395,915
    
    
    
    35,547
    
    
    
    5.09Total interest-earning assets
    
    
    8,602,895
    
    
    
    219,413
    
    
    
    5.12
    
    
    
    7,615,885
    
    
    
    224,873
    
    
    
    5.92Noninterest-earning assets(3)(4)
    
    
    1,246,448
    
    
    
    
    
    
    
    
    
    
    
    1,238,958Total assets
    
    $
    9,849,343
    
    
    
    
    
    
    
    
    
    
    $
    8,854,843Interest-bearing liabilities:Savings deposits
    
    $
    785,910
    
    
    
    930
    
    
    
    0.24
    %
    
    $
    793,819
    
    
    $
    1,193
    
    
    
    0.30
    %Checking deposits
    
    
    498,428
    
    
    
    381
    
    
    
    0.15
    
    
    
    481,403
    
    
    
    749
    
    
    
    0.31Money market deposits
    
    
    2,204,127
    
    
    
    13,794
    
    
    
    1.26
    
    
    
    1,843,205
    
    
    
    23,870
    
    
    
    2.60Certificates of deposit
    
    
    1,962,967
    
    
    
    24,788
    
    
    
    2.55
    
    
    
    2,242,432
    
    
    
    42,951
    
    
    
    3.85Borrowed funds
    
    
    1,677,352
    
    
    
    24,145
    
    
    
    2.89
    
    
    
    1,257,852
    
    
    
    25,955
    
    
    
    4.13Total interest-bearing liabilities
    
    
    7,128,784
    
    
    
    64,038
    
    
    
    1.81
    
    
    
    6,618,711
    
    
    
    94,718
    
    
    
    2.87Noninterest-bearing deposits
    
    
    716,497
    
    
    
    
    
    
    
    
    
    
    
    658,083Other noninterest-bearing liabilities
    
    
    152,458
    
    
    
    
    
    
    
    
    
    
    
    162,204Total liabilities
    
    
    7,997,739
    
    
    
    
    
    
    
    
    
    
    
    7,438,998Stockholders equity(3)
    
    
    1,851,604
    
    
    
    
    
    
    
    
    
    
    
    1,415,845Total liabilities and stockholders
equity
    
    $
    9,849,343
    
    
    
    
    
    
    
    
    
    
    $
    8,854,843Net interest income
    
    
    
    
    
    $
    155,375
    
    
    
    
    
    
    
    
    
    
    $
    130,155Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.31
    %
    
    
    
    
    
    
    
    
    
    
    3.05
    %Net earning assets
    
    $
    1,474,111
    
    
    
    
    
    
    
    
    
    
    $
    997,174Net interest rate margin
    
    
    
    
    
    
    3.62
    %
    
    
    
    
    
    
    
    
    
    
    3.42
    %Ratio of average interest-earning
assets to average interest-bearing liabilities
    
    
    120.68
    %
    
    
    
    
    
    
    
    
    
    
    115.07
    %
 
 (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 and includes securities held to
maturity and securities available for sale.(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.  
    
    Utilization of low cost, short-term borrowings to purchase investment securities in
anticipation of the National City acquisition.
 
    
    Product mix shift from maturing higher yielding certificates of deposit accounts to
lower rate money market and core deposit accounts resulting in a more favorable funding
mix.
 
    
    A 106 basis point reduction in rates on interest bearing liabilities, resulting in a 32%
decrease in interest expense for the six
months ended June 30, 2009.
 
    
    Reductions in the federal funds interest rate in late 2008 resulted in funding costs at
historical lows.
 Provision for Credit Losses
  Noninterest Income
    26




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##### Table of Contents



Noninterest Expense
    Income Taxes
  CAPITAL RESOURCES
      27




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##### Table of Contents



To be well capitalizedMinimum
    
    
    under prompt correctiveActual
    
    
    capital adequacy
    
    
    action provisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTangible capital
    
    $
    763,204
    
    
    
    7.13
    %
    
    
    160,581
    
    
    
    1.50
    %
    
    
    N/A
    
    
    
    N/A
    %Tier 1 (core) capital
    
    
    763,204
    
    
    
    7.13
    
    
    
    428,215
    
    
    
    4.00
    
    
    
    535,269
    
    
    
    5.00Tier 1 risk based capital
    
    
    763,204
    
    
    
    11.02
    
    
    
    276,998
    
    
    
    4.00
    
    
    
    415,496
    
    
    
    6.00Total risk based capital
    
    
    845,746
    
    
    
    12.21
    
    
    
    553,995
    
    
    
    8.00
    
    
    
    692,494
    
    
    
    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.
          28




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##### Table of Contents



ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
      Calculated decrease at June 30, 2009Changes in interest rates(1)
    
    Net interest income
    
    
    % Change(in thousands)+200 basis points
    
    $
    (1,538
    )
    
    
    (0.42
    )%+100 basis points
    
    
    (613
    )
    
    
    (0.17
    )
 (1)
    
    The Federal Reserve benchmark overnight federal funds rate was 0.25% at June 30,
2009, therefore, the calculation of the effect of a decrease in interest rates is not measurable.  29




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##### Table of Contents



ITEM 4.
    
    Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    Legal Proceedings
  
 ITEM 1A.
    
    Risk Factors
  We Hold Certain Intangible Assets that Could Be Classified as Impaired in The Future. If These
Assets Are Considered To Be Either Partially or Fully Impaired in the Future, Our Earnings and the
Book Values of These Assets Would Decrease.
 Goodwill and Other Intangible Assets
 Any Future FDIC Insurance Premiums Will Adversely Impact Our Earnings.
  
 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 second quarter of 2009.
 
 ITEM 3.
    
    Defaults Upon Senior Securities
   30




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##### Table of Contents



ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
  Number of VotesMatter Considered
    
    For
    
    
    WithheldElection of DirectorsCarl A. Florio
    
    
    100,516,782
    
    
    
    2,180,937David M. Zebro
    
    
    99,928,893
    
    
    
    2,768,826
   Number of VotesMatter Considered
    
    For
    
    
    Against
    
    
Abstain
    
    
Brokernon-votesAdvisory non-binding vote to
approve our executive
compensation programs and
policies
    
    
    96,521,906
    
    
    
    5,202,155
    
    
    
    973,650
    
    
    
    11Ratification of KPMG LLP as
Independent Registered Public
Accounting Firm for the year
ending December 31, 2009
    
    
    101,102,451
    
    
    
    1,374,810
    
    
    
    220,453
    
    
    
    0
 
 ITEM 5.
    
    Other Information
 (a)
    
    Not applicable.(b)
    
    Not applicable.
 
 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
  31




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##### Table of Contents



SIGNATURES
  FIRST NIAGARA FINANCIAL GROUP, INC.Date:  August 7, 2009
    By:
    /s/ John R. KoelmelJohn R. KoelmelPresident and Chief Executive OfficerDate:  August 7, 2009
    By:
    /s/ Michael W. HarringtonMichael W. HarringtonChief Financial Officer  32




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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
  33