##### 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, 2011
 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.)726 Exchange Street, Suite 618, Buffalo, NY
    
    14210(Address of principal executive offices)
    
    (Zip Code)
 (716) 819-5500  (Registrants telephone number, including area code)
 
 þ o
 YES þ NO o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
 YES o NO þ
  o o




---



##### 



FIRST NIAGARA FINANCIAL GROUP, INC.
FORM 10-Q
For the Quarterly Period Ended June 30, 2011
TABLE OF CONTENTS
 Item Number
    
    Page NumberPART I  FINANCIAL INFORMATION1. Financial StatementsConsolidated Statements of Condition at
June 30, 2011 (unaudited) and December 31, 2010
    
    
    3Consolidated Statements of Income for the
three and six months ended June 30, 2011 and 2010 (unaudited)
    
    
    4Consolidated Statements of Comprehensive Income for the
three and six months ended June 30, 2011 and 2010 (unaudited)
    
    
    5Consolidated Statements of Changes in Stockholders Equity for the
six months ended June 30, 2011 and 2010 (unaudited)
    
    
    6Consolidated Statements of Cash Flows for the
six months ended June 30, 2011 and 2010 (unaudited)
    
    
    7Notes to Consolidated Financial Statements (unaudited)
    
    
    82. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    383. Quantitative and Qualitative Disclosures About Market Risk
    
    
    704. Controls and Procedures
    
    
    70PART II  OTHER INFORMATION1. Legal Proceedings
    
    
    711A. Risk Factors
    
    
    712. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    713. Defaults Upon Senior Securities
    
    
    714. [Removed and Reserved]5. Other Information
    
    
    716. Exhibits
    
    
    71Signatures
    
    
    72Exhibit 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 SUBSIDIARIES
 
 Consolidated Statements of Condition
  June 30,
    
    
    December 31,2011
    
    
    2010(unaudited)ASSETSCash and cash equivalents
    
    $
    318,820
    
    
    $
    213,820Investment securities:Available for sale, at fair value (amortized cost of $8,053,750
and $7,175,442 in 2011 and 2010; includes pledged securities that can be
sold or repledged of $4,049,300 and $4,052,259 in 2011 and 2010)
    
    
    8,219,695
    
    
    
    7,289,455Held to maturity, at amortized cost (fair value of $2,992,924
and $1,043,803 in 2011 and 2010; includes pledged securities that can be
sold or repledged of $2,799,370 in 2011)
    
    
    2,939,933
    
    
    
    1,025,724Federal Home Loan Bank and Federal Reserve Bank common stock,
at amortized cost and fair value
    
    
    305,241
    
    
    
    183,800Loans held for sale
    
    
    51,141
    
    
    
    37,977Loans and
leases (net of allowance for loan losses of $107,028
and $95,354 in 2011 and 2010)
    
    
    16,062,197
    
    
    
    10,388,060Bank owned life insurance
    
    
    378,241
    
    
    
    230,718Premises and equipment, net
    
    
    292,778
    
    
    
    217,555Goodwill
    
    
    1,719,208
    
    
    
    1,023,977Core deposit and other intangibles, net
    
    
    110,504
    
    
    
    90,167Other assets
    
    
    491,888
    
    
    
    382,600Total assets
    
    $
    30,889,646
    
    
    $
    21,083,853LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits
    
    $
    18,900,495
    
    
    $
    13,148,844Short-term borrowings
    
    
    1,466,745
    
    
    
    1,788,566Long-term borrowings
    
    
    6,134,181
    
    
    
    3,104,908Other
    
    
    395,390
    
    
    
    276,465Total liabilities
    
    
    26,896,811
    
    
    
    18,318,783Stockholders equity:Preferred stock, $0.01 par value, 50,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 500,000,000 shares authorized;
309,090,281 and 215,105,566 shares issued in 2011 and 2010
    
    
    3,091
    
    
    
    2,151Additional paid-in capital
    
    
    3,758,215
    
    
    
    2,430,571Retained earnings
    
    
    353,387
    
    
    
    376,670Accumulated other comprehensive income
    
    
    89,542
    
    
    
    57,871Common stock held by employee stock ownership plan, 2,488,277
and 2,621,978 shares in 2011 and 2010
    
    
    (19,907
    )
    
    
    (20,758
    )Treasury stock, at cost, 13,844,897 and 5,993,906 shares
in 2011 and 2010
    
    
    (191,493
    )
    
    
    (81,435
    )Total stockholders equity
    
    
    3,992,835
    
    
    
    2,765,070Total liabilities and stockholders equity
    
    $
    30,889,646
    
    
    $
    21,083,853
   3




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 Consolidated
Statements of Income (unaudited)
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Interest income:Loans and leases
    
    $
    184,341
    
    
    $
    133,564
    
    
    $
    316,458
    
    
    $
    230,144Investment securities and other
    
    
    93,029
    
    
    
    61,565
    
    
    
    169,796
    
    
    
    109,488Total interest income
    
    
    277,370
    
    
    
    195,129
    
    
    
    486,254
    
    
    
    339,632Interest expense:Deposits
    
    
    21,324
    
    
    
    20,698
    
    
    
    36,945
    
    
    
    35,081Borrowings
    
    
    25,609
    
    
    
    19,673
    
    
    
    46,004
    
    
    
    35,624Total interest expense
    
    
    46,933
    
    
    
    40,371
    
    
    
    82,949
    
    
    
    70,705Net interest income
    
    
    230,437
    
    
    
    154,758
    
    
    
    403,305
    
    
    
    268,927Provision for credit losses
    
    
    17,307
    
    
    
    11,000
    
    
    
    30,207
    
    
    
    24,131Net interest income after provision for credit losses
    
    
    213,130
    
    
    
    143,758
    
    
    
    373,098
    
    
    
    244,796Noninterest income:Banking services
    
    
    24,613
    
    
    
    21,529
    
    
    
    43,619
    
    
    
    37,536Insurance commissions
    
    
    17,044
    
    
    
    12,768
    
    
    
    32,799
    
    
    
    24,931Wealth management services
    
    
    7,883
    
    
    
    5,711
    
    
    
    14,617
    
    
    
    8,959Mortgage banking
    
    
    3,386
    
    
    
    1,626
    
    
    
    4,649
    
    
    
    2,858Lending and leasing
    
    
    2,811
    
    
    
    2,510
    
    
    
    6,574
    
    
    
    4,554Bank owned life insurance
    
    
    3,055
    
    
    
    1,976
    
    
    
    5,085
    
    
    
    3,200Other
    
    
    2,103
    
    
    
    (70
    )
    
    
    5,626
    
    
    
    960Total noninterest income
    
    
    60,895
    
    
    
    46,050
    
    
    
    112,969
    
    
    
    82,998Noninterest expense:Salaries and employee benefits
    
    
    90,192
    
    
    
    64,081
    
    
    
    163,968
    
    
    
    112,318Occupancy and equipment
    
    
    18,952
    
    
    
    13,422
    
    
    
    35,149
    
    
    
    23,329Technology and communications
    
    
    13,929
    
    
    
    11,403
    
    
    
    26,800
    
    
    
    20,052Marketing and advertising
    
    
    3,880
    
    
    
    7,691
    
    
    
    6,572
    
    
    
    9,223Professional services
    
    
    9,138
    
    
    
    4,054
    
    
    
    15,177
    
    
    
    6,564Amortization of intangibles
    
    
    6,573
    
    
    
    5,311
    
    
    
    12,062
    
    
    
    8,558Federal deposit insurance premiums
    
    
    6,267
    
    
    
    4,959
    
    
    
    12,462
    
    
    
    8,422Merger and acquisition integration expenses
    
    
    76,828
    
    
    
    35,837
    
    
    
    83,004
    
    
    
    42,069Restructuring charges
    
    
    11,656
    
    
    
    
    
    
    
    12,712
    
    
    
    Other
    
    
    17,726
    
    
    
    11,445
    
    
    
    32,385
    
    
    
    20,850Total noninterest expense
    
    
    255,141
    
    
    
    158,203
    
    
    
    400,291
    
    
    
    251,385Income before income taxes
    
    
    18,884
    
    
    
    31,605
    
    
    
    85,776
    
    
    
    76,409Income tax expense
    
    
    5,334
    
    
    
    11,602
    
    
    
    27,308
    
    
    
    27,507Net income
    
    $
    13,550
    
    
    $
    20,003
    
    
    $
    58,468
    
    
    $
    48,902Earnings per share:Basic
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.24
    
    
    $
    0.25Diluted
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.24
    
    
    $
    0.25Weighted average common shares outstanding:Basic
    
    
    281,496
    
    
    
    203,962
    
    
    
    244,018
    
    
    
    194,594Diluted
    
    
    282,420
    
    
    
    204,402
    
    
    
    244,914
    
    
    
    195,082Dividends per common share
    
    $
    0.16
    
    
    $
    0.14
    
    
    $
    0.32
    
    
    $
    0.28
   4




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Comprehensive Income (unaudited)
  Three months ended June 30,
    
    
    Six months ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net income
    
    $
    13,550
    
    
    $
    20,003
    
    
    $
    58,468
    
    
    $
    48,902Other comprehensive income, net of income taxes:Securities available for sale:Net unrealized gains arising during the period
    
    
    42,817
    
    
    
    74,452
    
    
    
    36,020
    
    
    
    100,216Reclassification adjustment for net unrealized holding gains on
securities transferred to held to maturity during the period
    
    
    
    
    
    
    
    
    
    
    (3,956
    )
    
    
    42,817
    
    
    
    74,452
    
    
    
    32,064
    
    
    
    100,216Net unrealized holding gains on securities transferred
from available for sale to held to maturity:Net unrealized holding gains on securities transferred during
the period
    
    
    
    
    
    
    
    
    
    
    3,956
    
    
    
    Less: amortization of net unrealized holding gains
to income during the period
    
    
    (407
    )
    
    
    
    
    
    
    (407
    )
    
    
    (407
    )
    
    
    
    
    
    
    3,549
    
    
    
    Net unrealized (losses) gains on interest rate swaps designated as
cash flow hedges arising during the period
    
    
    (6,065
    )
    
    
    161
    
    
    
    (4,501
    )
    
    
    170Amortization of net loss (gain) related to pension and
post-retirement plans
    
    
    356
    
    
    
    (198
    )
    
    
    559
    
    
    
    (42
    )Total other comprehensive income
    
    
    36,701
    
    
    
    74,415
    
    
    
    31,671
    
    
    
    100,344Total comprehensive income
    
    $
    50,251
    
    
    $
    94,418
    
    
    $
    90,139
    
    
    $
    149,246
   5




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Changes in Stockholders Equity unaudited)
  Accumulated
    
    
    CommonAdditional
    
    
    
    
    
    
    other
    
    
    stockCommon
    
    
    paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    held by
    
    
    Treasurystock
    
    
    capital
    
    
    earnings
    
    
    income
    
    
    ESOP
    
    
    stock
    
    
    TotalBalances at January 1, 2011
    
    $
    2,151
    
    
    $
    2,430,571
    
    
    $
    376,670
    
    
    $
    57,871
    
    
    $
    (20,758
    )
    
    $
    (81,435
    )
    
    $
    2,765,070Net income
    
    
    
    
    
    
    
    
    
    
    58,468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,468Total other comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,671
    
    
    
    
    
    
    
    
    
    
    
    31,671Purchases of treasury stock (8,666,000 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121,137
    )
    
    
    (121,137
    )Common stock issued for the acquisition of
NewAlliance Bancshares, Inc. (93,984,715 shares)
    
    
    940
    
    
    
    1,330,612
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,331,552ESOP shares committed to
be released (133,701 shares)
    
    
    
    
    
    
    630
    
    
    
    
    
    
    
    
    
    
    
    851
    
    
    
    
    
    
    
    1,481Stock-based compensation expense
    
    
    
    
    
    
    3,760
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,760Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    490Exercise of stock options and restricted
stock activity (815,009 shares)
    
    
    
    
    
    
    (7,848
    )
    
    
    (660
    )
    
    
    
    
    
    
    
    
    
    
    11,079
    
    
    
    2,571Common stock dividends of $0.32 per share
    
    
    
    
    
    
    
    
    
    
    (81,091
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,091
    )Balances at June 30, 2011
    
    $
    3,091
    
    
    $
    3,758,215
    
    
    $
    353,387
    
    
    $
    89,542
    
    
    $
    (19,907
    )
    
    $
    (191,493
    )
    
    $
    3,992,835Balances at January 1, 2010
    
    $
    1,948
    
    
    $
    2,128,196
    
    
    $
    352,948
    
    
    $
    2,514
    
    
    $
    (22,382
    )
    
    $
    (89,563
    )
    
    $
    2,373,661Net income
    
    
    
    
    
    
    
    
    
    
    48,902
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,902Total other comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,344
    
    
    
    
    
    
    
    
    
    
    
    100,344Common stock issued for the acquisition of Harleysville
National Corporation (20,295,305 shares)
    
    
    203
    
    
    
    299,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    299,903Purchase of noncontrolling interest in consolidated
subsidiary, net of tax
    
    
    
    
    
    
    (614
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (614
    )ESOP shares committed to
be released (131,435 shares)
    
    
    
    
    
    
    647
    
    
    
    
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    1,486Stock-based compensation expense
    
    
    
    
    
    
    2,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,646Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    892Exercise of stock options and restricted
stock activity (529,869 shares)
    
    
    
    
    
    
    (4,182
    )
    
    
    (1,866
    )
    
    
    
    
    
    
    
    
    
    
    7,141
    
    
    
    1,093Common stock dividends of $0.28 per share
    
    
    
    
    
    
    
    
    
    
    (54,848
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,848
    )Balances at June 30, 2010
    
    $
    2,151
    
    
    $
    2,427,285
    
    
    $
    345,136
    
    
    $
    102,858
    
    
    $
    (21,543
    )
    
    $
    (82,422
    )
    
    $
    2,773,465
   6




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARIES


Consolidated Statements of Cash Flows (unaudited)
 Six months ended June 30,2011
    
    
    2010Cash flows from operating activities:Net income
    
    $
    58,468
    
    
    $
    48,902Adjustments to reconcile net income to net cash
provided by operating activities:Accretion of fees and discounts, net
    
    
    (1,101
    )
    
    
    (6,227
    )Provision for credit losses
    
    
    30,207
    
    
    
    24,131Depreciation of premises and equipment
    
    
    15,555
    
    
    
    9,805Amortization of intangibles
    
    
    12,062
    
    
    
    8,558Origination of loans held for sale
    
    
    (260,700
    )
    
    
    (253,523
    )Proceeds from sales of loans held for sale
    
    
    247,839
    
    
    
    209,820ESOP and stock based-compensation expense
    
    
    5,241
    
    
    
    4,132Deferred income tax expense
    
    
    10,790
    
    
    
    20,262Other, net
    
    
    23,684
    
    
    
    10,853Net cash provided by operating activities
    
    
    142,045
    
    
    
    76,713Cash flows from investing activities:Proceeds from sales of securities available for sale
    
    
    493,738
    
    
    
    121,524Proceeds from maturities of securities available for sale
    
    
    134,506
    
    
    
    314,431Principal payments received on securities available for sale
    
    
    598,301
    
    
    
    409,737Purchases of securities available for sale
    
    
    (1,322,486
    )
    
    
    (2,420,695
    )Principal payments received on securities held to maturity
    
    
    161,565
    
    
    
    100,396Purchases of securities held to maturity
    
    
    (93,082
    )
    
    
    (51,752
    )Purchases of Federal Home Loan Bank and Federal
Reserve Bank common stock
    
    
    (620
    )
    
    
    (43,954
    )Net increase in loans and leases
    
    
    (582,008
    )
    
    
    (46,442
    )Acquisitions, net of cash and cash equivalents
    
    
    (51,344
    )
    
    
    1,148,646Purchases of
premises and equipment
    
    
    (28,390
    )
    
    
    (21,885
    )Other, net
    
    
    (8,636
    )
    
    
    3,034Net cash
used in investing activities
    
    
    (698,456
    )
    
    
    (486,960
    )Cash flows from financing activities:Net increase in deposits
    
    
    455,262
    
    
    
    101,190Repayments of short-term borrowings, net
    
    
    (12,379
    )
    
    
    (338,307
    )Proceeds from long-term borrowings
    
    
    550,943
    
    
    
    946,534Repayments of long-term borrowings
    
    
    (135,832
    )
    
    
    (150,000
    )Purchases of treasury stock
    
    
    (121,137
    )
    
    
    Proceeds from exercise of stock options
    
    
    5,140
    
    
    
    1,216Excess tax benefit from stock-based compensation
    
    
    490
    
    
    
    892Dividends paid on common stock
    
    
    (81,076
    )
    
    
    (54,841
    )Net cash provided by financing activities
    
    
    661,411
    
    
    
    506,684Net increase in cash and cash equivalents
    
    
    105,000
    
    
    
    96,437Cash and cash equivalents at beginning of period
    
    
    213,820
    
    
    
    236,268Cash and cash equivalents at end of period
    
    $
    318,820
    
    
    $
    332,705Supplemental disclosuresCash paid during the period for:Income taxes
    
    $
    57,737
    
    
    $
    30,078Interest expense
    
    
    101,314
    
    
    
    64,301Acquisition of noncash assets and liabilities:Assets acquired
    
    
    9,062,211
    
    
    
    4,146,768Liabilities assumed
    
    
    7,679,315
    
    
    
    4,995,993Other noncash activity:Securities
available for sale purchased not settled
    
    
    25,737
    
    
    
    40,394Securities transferred from available for sale to held to maturity (at fair value)
    
    
    1,994,193
    
    
    
    
   7




---



##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements (unaudited)
    Note 1. Acquisitions
 NewAlliance Bancshares, Inc.
    8




---



##### Table of Contents



Consideration paid:First Niagara Financial Group, Inc. common stock issued
    
    $
    1,315,786Cash payments to NewAlliance stockholders
    
    
    198,681Fair value of NewAlliance employee stock options
    
    
    15,766Total consideration paid
    
    
    1,530,233Recognized amounts of identifiable assets acquired and
(liablities assumed), at fair value:Cash and cash equivalents
    
    $
    126,322Investment securities available for sale
    
    
    2,759,329Loans
    
    
    5,113,195Federal Home Loan Bank common stock
    
    
    120,820Bank owned life insurance
    
    
    137,359Premises and equipment
    
    
    65,306Core deposit intangible
    
    
    23,800Other assets
    
    
    172,111Deposits
    
    
    (5,312,265
    )Borrowings
    
    
    (2,299,321
    )Other liabilities
    
    
    (64,142
    )Total identifiable net assets
    
    
    842,514Goodwill
    
    $
    687,719
    Contractually required principal and interest at acquisition
    
    $
    6,472,506Contractual cash flows not expected to be collected (nonaccretable discount)
    
    
    (212,724
    )Expected cash flows at acquisition
    
    
    6,259,782Interest component of expected cash flows (accretable discount)
    
    
    (1,146,587
    )Fair value of acquired loans
    
    $
    5,113,195
     9




---



##### Table of Contents



Actual from acquisition
    
    
    Pro formadate through
    
    
    Six months ended June 30,June 30, 2011
    
    
    2011
    
    
    2010Net interest income
    
    $
    57,086
    
    
    $
    472,873
    
    
    $
    389,289Noninterest income
    
    
    9,883
    
    
    
    125,581
    
    
    
    114,283Net income
    
    
    19,122
    
    
    
    127,644
    
    
    
    108,274Pro forma earnings per share:Basic
    
    
    
    
    
    $
    0.47
    
    
    $
    0.44Diluted
    
    
    
    
    
    
    0.47
    
    
    
    0.44
 Harleysville National Corporation
   10




---



##### Table of Contents



Consideration paid:First Niagara Financial Group, Inc. common stock issued
    
    $
    298,747Cash in lieu of fractional shares paid to Harleysville stockholders
    
    
    41Fair value of Harleysville employee stock options
    
    
    1,115Total consideration paid
    
    
    299,903Recognized amounts of identifiable assets acquired and
(liablities assumed), at fair value:Cash and cash equivalents
    
    
    1,148,704Investment securities available for sale
    
    
    945,570Loans
    
    
    2,644,256Federal Home Loan Bank common stock
    
    
    42,992Bank owned life insurance
    
    
    91,042Premises and equipment
    
    
    44,511Core deposit intangible
    
    
    42,200Other assets
    
    
    205,692Deposits
    
    
    (3,953,333
    )Borrowings
    
    
    (960,259
    )Other liabilities
    
    
    (82,361
    )Total identifiable net assets
    
    
    169,014Goodwill
    
    $
    130,889
   Contractually required principal and interest at acquisition
    
    $
    3,383,245Contractual cash flows not expected to be collected (nonaccretable discount)
    
    
    (326,287
    )Expected cash flows at acquisition
    
    
    3,056,958Interest component of expected cash flows (accretable discount)
    
    
    (412,702
    )Fair value of acquired loans
    
    $
    2,644,256
     11




---



##### Table of Contents



Actual from acquisition
    
    
    Pro formadate through
    
    
    Six months endedJune 30, 2010
    
    
    June 30, 2010Net interest income
    
    $
    42,805
    
    
    $
    308,606Noninterest income
    
    
    8,360
    
    
    
    96,313Net income
    
    
    14,988
    
    
    
    44,002Pro forma earnings per share:Basic
    
    
    
    
    
    $
    0.21Diluted
    
    
    
    
    
    
    0.21
 HSBC Bank Branches
  Other
   12




---



##### Table of Contents



Note 2. Investment Securities
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairJune 30, 2011:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    676,306
    
    
    $
    11,899
    
    
    $
    (471
    )
    
    $
    687,734U.S. government agencies
    
    
    5,819
    
    
    
    5
    
    
    
    (9
    )
    
    
    5,815U.S. government sponsored enterprises
    
    
    628,481
    
    
    
    10,406
    
    
    
    (303
    )
    
    
    638,584Corporate
    
    
    207,546
    
    
    
    1,684
    
    
    
    (665
    )
    
    
    208,565Trust preferred securities
    
    
    29,677
    
    
    
    497
    
    
    
    (1,272
    )
    
    
    28,902Total debt securities
    
    
    1,547,829
    
    
    
    24,491
    
    
    
    (2,720
    )
    
    
    1,569,600Mortgage-backed securities:Residential mortgage-backed securities:Government National Mortgage Association
    
    
    104,221
    
    
    
    2,895
    
    
    
    
    
    
    
    107,116Federal National Mortgage Association
    
    
    868,595
    
    
    
    13,152
    
    
    
    (84
    )
    
    
    881,663Federal Home Loan Mortgage Corporation
    
    
    755,796
    
    
    
    10,101
    
    
    
    (55
    )
    
    
    765,842Collateralized mortgage obligations:Government National Mortgage Association
    
    
    2,679,306
    
    
    
    86,568
    
    
    
    (163
    )
    
    
    2,765,711Federal National Mortgage Association
    
    
    730,942
    
    
    
    14,306
    
    
    
    (1,002
    )
    
    
    744,246Federal Home Loan Mortgage Corporation
    
    
    734,082
    
    
    
    13,949
    
    
    
    (191
    )
    
    
    747,840Non-agency issued
    
    
    128,110
    
    
    
    1,621
    
    
    
    (1,000
    )
    
    
    128,731Total collateralized mortgage obligations
    
    
    4,272,440
    
    
    
    116,444
    
    
    
    (2,356
    )
    
    
    4,386,528Total residential mortgage-backed securities
    
    
    6,001,052
    
    
    
    142,592
    
    
    
    (2,495
    )
    
    
    6,141,149Commercial mortgage-backed securities:Non-agency issued
    
    
    473,892
    
    
    
    4,938
    
    
    
    (978
    )
    
    
    477,852Total mortgage-backed securities
    
    
    6,474,944
    
    
    
    147,530
    
    
    
    (3,473
    )
    
    
    6,619,001Asset-backed securities
    
    
    128
    
    
    
    
    
    
    
    (6
    )
    
    
    122Other
    
    
    30,849
    
    
    
    202
    
    
    
    (79
    )
    
    
    30,972Total securities available for sale
    
    $
    8,053,750
    
    
    $
    172,223
    
    
    $
    (6,278
    )
    
    $
    8,219,695Investment securities held to maturity:Residential mortgage-backed securities:Government National Mortgage Association
    
    $
    6,838
    
    
    $
    85
    
    
    $
    (5
    )
    
    $
    6,918Federal National Mortgage Association
    
    
    18,267
    
    
    
    244
    
    
    
    
    
    
    
    18,511Federal Home Loan Mortgage Corporation
    
    
    15,965
    
    
    
    278
    
    
    
    
    
    
    
    16,243Collateralized mortgage obligations:Government National Mortgage Association
    
    
    2,035,392
    
    
    
    37,128
    
    
    
    (1,576
    )
    
    
    2,070,944Federal National Mortgage Association
    
    
    244,632
    
    
    
    6,868
    
    
    
    (280
    )
    
    
    251,220Federal Home Loan Mortgage Corporation
    
    
    618,839
    
    
    
    12,958
    
    
    
    (2,709
    )
    
    
    629,088Total collateralized mortgage obligations
    
    
    2,898,863
    
    
    
    56,954
    
    
    
    (4,565
    )
    
    
    2,951,252Total securities held to maturity
    
    $
    2,939,933
    
    
    $
    57,561
    
    
    $
    (4,570
    )
    
    $
    2,992,924
  13




---



##### Table of Contents



Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairDecember 31, 2010:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    595,978
    
    
    $
    4,631
    
    
    $
    (3,175
    )
    
    $
    597,434U.S. government sponsored enterprises
    
    
    184,569
    
    
    
    3,751
    
    
    
    (1,113
    )
    
    
    187,207Corporate
    
    
    123,475
    
    
    
    166
    
    
    
    (2,525
    )
    
    
    121,116Total debt securities
    
    
    904,022
    
    
    
    8,548
    
    
    
    (6,813
    )
    
    
    905,757Mortgage-backed securities:Residential mortgage-backed securities:Government National Mortgage Association
    
    
    75,874
    
    
    
    1,916
    
    
    
    
    
    
    
    77,790Federal National Mortgage Association
    
    
    167,355
    
    
    
    5,788
    
    
    
    (4
    )
    
    
    173,139Federal Home Loan Mortgage Corporation
    
    
    121,785
    
    
    
    4,381
    
    
    
    (7
    )
    
    
    126,159Collateralized mortgage obligations:Government National Mortgage Association
    
    
    4,462,585
    
    
    
    95,351
    
    
    
    (9,019
    )
    
    
    4,548,917Federal National Mortgage Association
    
    
    561,430
    
    
    
    14,342
    
    
    
    (2,742
    )
    
    
    573,030Federal Home Loan Mortgage Corporation
    
    
    544,447
    
    
    
    11,248
    
    
    
    (9,543
    )
    
    
    546,152Non-agency issued
    
    
    150,243
    
    
    
    2,056
    
    
    
    (1,525
    )
    
    
    150,774Total collateralized mortgage obligations
    
    
    5,718,705
    
    
    
    122,997
    
    
    
    (22,829
    )
    
    
    5,818,873Total residential mortgage-backed securities
    
    
    6,083,719
    
    
    
    135,082
    
    
    
    (22,840
    )
    
    
    6,195,961Commercial mortgage-backed securities:Non-agency issued
    
    
    162,669
    
    
    
    
    
    
    
    
    
    
    
    162,669Total mortgage-backed securities
    
    
    6,246,388
    
    
    
    135,082
    
    
    
    (22,840
    )
    
    
    6,358,630Asset-backed securities
    
    
    2,755
    
    
    
    
    
    
    
    (24
    )
    
    
    2,731Other
    
    
    22,277
    
    
    
    136
    
    
    
    (76
    )
    
    
    22,337Total securities available for sale
    
    $
    7,175,442
    
    
    $
    143,766
    
    
    $
    (29,753
    )
    
    $
    7,289,455Investment securities held to maturity:Residential mortgage-backed securities:Collateralized mortgage obligations:Government National Mortgage Association
    
    $
    497,310
    
    
    $
    12,443
    
    
    $
    (4,095
    )
    
    $
    505,658Federal National Mortgage Association
    
    
    244,664
    
    
    
    5,857
    
    
    
    (960
    )
    
    
    249,561Federal Home Loan Mortgage Corporation
    
    
    283,750
    
    
    
    7,580
    
    
    
    (2,746
    )
    
    
    288,584Total securities held to maturity
    
    $
    1,025,724
    
    
    $
    25,880
    
    
    $
    (7,801
    )
    
    $
    1,043,803
  14




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##### Table of Contents



Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedJune 30, 2011:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    72,969
    
    
    $
    (467
    )
    
    $
    1,597
    
    
    $
    (4
    )
    
    $
    74,566
    
    
    $
    (471
    )U.S. government agencies
    
    
    
    
    
    
    
    
    
    
    2,276
    
    
    
    (9
    )
    
    
    2,276
    
    
    
    (9
    )U.S. government sponsored enterprises
    
    
    64,633
    
    
    
    (303
    )
    
    
    
    
    
    
    
    
    
    
    64,633
    
    
    
    (303
    )Corporate
    
    
    50,687
    
    
    
    (665
    )
    
    
    
    
    
    
    
    
    
    
    50,687
    
    
    
    (665
    )Trust preferred securities
    
    
    16,856
    
    
    
    (526
    )
    
    
    900
    
    
    
    (746
    )
    
    
    17,756
    
    
    
    (1,272
    )Total debt securities
    
    
    205,145
    
    
    
    (1,961
    )
    
    
    4,773
    
    
    
    (759
    )
    
    
    209,918
    
    
    
    (2,720
    )Mortgage-backed securities:Residential mortgage-backed securities:Federal National Mortgage Association
    
    
    37,026
    
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    37,026
    
    
    
    (84
    )Federal Home Loan Mortgage Corporation
    
    
    20,191
    
    
    
    (55
    )
    
    
    
    
    
    
    
    
    
    
    20,191
    
    
    
    (55
    )Collateralized mortgage obligations:Government National Mortgage Association
    
    
    18,531
    
    
    
    (163
    )
    
    
    
    
    
    
    
    
    
    
    18,531
    
    
    
    (163
    )Federal National Mortgage Association
    
    
    102,553
    
    
    
    (1,002
    )
    
    
    
    
    
    
    
    
    
    
    102,553
    
    
    
    (1,002
    )Federal Home Loan Mortgage Corporation
    
    
    95,242
    
    
    
    (191
    )
    
    
    
    
    
    
    
    
    
    
    95,242
    
    
    
    (191
    )Non-agency issued
    
    
    30,923
    
    
    
    (397
    )
    
    
    15,224
    
    
    
    (603
    )
    
    
    46,147
    
    
    
    (1,000
    )Total collateralized mortgage obligations
    
    
    247,249
    
    
    
    (1,753
    )
    
    
    15,224
    
    
    
    (603
    )
    
    
    262,473
    
    
    
    (2,356
    )Total residential mortgage-backed securities
    
    
    304,466
    
    
    
    (1,892
    )
    
    
    15,224
    
    
    
    (603
    )
    
    
    319,690
    
    
    
    (2,495
    )Commercial mortgage-backed securities:Non-agency issued
    
    
    128,605
    
    
    
    (978
    )
    
    
    
    
    
    
    
    
    
    
    128,605
    
    
    
    (978
    )Total mortgage-backed securities
    
    
    433,071
    
    
    
    (2,870
    )
    
    
    15,224
    
    
    
    (603
    )
    
    
    448,295
    
    
    
    (3,473
    )Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    (6
    )
    
    
    122
    
    
    
    (6
    )Other
    
    
    3,216
    
    
    
    (79
    )
    
    
    
    
    
    
    
    
    
    
    3,216
    
    
    
    (79
    )Total securities available for sale in an
unrealized loss position
    
    $
    641,432
    
    
    $
    (4,910
    )
    
    $
    20,119
    
    
    $
    (1,368
    )
    
    $
    661,551
    
    
    $
    (6,278
    )Investment securities held to maturity:Residential mortgage-backed securities:Government National Mortgage Association
    
    $
    2,236
    
    
    $
    (5
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,236
    
    
    $
    (5
    )Collateralized mortgage obligations:Government National Mortgage Association
    
    
    165,610
    
    
    
    (1,576
    )
    
    
    
    
    
    
    
    
    
    
    165,610
    
    
    
    (1,576
    )Federal National Mortgage Association
    
    
    24,173
    
    
    
    (280
    )
    
    
    
    
    
    
    
    
    
    
    24,173
    
    
    
    (280
    )Federal Home Loan Mortgage Corporation
    
    
    95,504
    
    
    
    (2,709
    )
    
    
    
    
    
    
    
    
    
    
    95,504
    
    
    
    (2,709
    )Total securities held to maturity in an
unrealized loss position
    
    $
    287,523
    
    
    $
    (4,570
    )
    
    $
    
    
    
    $
    
    
    
    $
    287,523
    
    
    $
    (4,570
    )
  15




---



##### Table of Contents



Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDecember 31, 2010:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    209,984
    
    
    $
    (3,175
    )
    
    $
    
    
    
    $
    
    
    
    $
    209,984
    
    
    $
    (3,175
    )U.S. government sponsored enterprises
    
    
    52,467
    
    
    
    (1,113
    )
    
    
    
    
    
    
    
    
    
    
    52,467
    
    
    
    (1,113
    )Corporate
    
    
    96,222
    
    
    
    (1,669
    )
    
    
    785
    
    
    
    (856
    )
    
    
    97,007
    
    
    
    (2,525
    )Total debt securities
    
    
    358,673
    
    
    
    (5,957
    )
    
    
    785
    
    
    
    (856
    )
    
    
    359,458
    
    
    
    (6,813
    )Mortgage-backed securities:Residential mortgage-backed securities:Federal National Mortgage Association
    
    
    798
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    798
    
    
    
    (4
    )Federal Home Loan Mortgage Corporation
    
    
    447
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    447
    
    
    
    (7
    )Collateralized mortgage obligations:Government National Mortgage Association
    
    
    473,275
    
    
    
    (9,019
    )
    
    
    
    
    
    
    
    
    
    
    473,275
    
    
    
    (9,019
    )Federal National Mortgage Association
    
    
    38,640
    
    
    
    (2,742
    )
    
    
    
    
    
    
    
    
    
    
    38,640
    
    
    
    (2,742
    )Federal Home Loan Mortgage Corporation
    
    
    148,911
    
    
    
    (9,543
    )
    
    
    
    
    
    
    
    
    
    
    148,911
    
    
    
    (9,543
    )Non-agency issued
    
    
    37,352
    
    
    
    (294
    )
    
    
    20,923
    
    
    
    (1,231
    )
    
    
    58,275
    
    
    
    (1,525
    )Total collateralized mortgage obligations
    
    
    698,178
    
    
    
    (21,598
    )
    
    
    20,923
    
    
    
    (1,231
    )
    
    
    719,101
    
    
    
    (22,829
    )Total mortgage-backed securities
    
    
    699,423
    
    
    
    (21,609
    )
    
    
    20,923
    
    
    
    (1,231
    )
    
    
    720,346
    
    
    
    (22,840
    )Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    2,731
    
    
    
    (24
    )
    
    
    2,731
    
    
    
    (24
    )Other
    
    
    3,194
    
    
    
    (76
    )
    
    
    
    
    
    
    
    
    
    
    3,194
    
    
    
    (76
    )Total securities available for sale in an
unrealized loss position
    
    $
    1,061,290
    
    
    $
    (27,642
    )
    
    $
    24,439
    
    
    $
    (2,111
    )
    
    $
    1,085,729
    
    
    $
    (29,753
    )Investment securities held to maturity:Residential mortgage-backed securities:Collateralized mortgage obligations:Government National Mortgage Association
    
    $
    72,842
    
    
    $
    (4,095
    )
    
    $
    
    
    
    $
    
    
    
    $
    72,842
    
    
    $
    (4,095
    )Federal National Mortgage Association
    
    
    24,292
    
    
    
    (960
    )
    
    
    
    
    
    
    
    
    
    
    24,292
    
    
    
    (960
    )Federal Home Loan Mortgage Corporation
    
    
    47,254
    
    
    
    (2,746
    )
    
    
    
    
    
    
    
    
    
    
    47,254
    
    
    
    (2,746
    )Total securities held to maturity in an
unrealized loss position
    
    $
    144,388
    
    
    $
    (7,801
    )
    
    $
    
    
    
    $
    
    
    
    $
    144,388
    
    
    $
    (7,801
    )
     16




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##### Table of Contents



Amortized
    
    
    Faircost
    
    
    valueDebt securities:Within one year
    
    $
    123,193
    
    
    $
    123,720After one year through five years
    
    
    622,812
    
    
    
    634,249After five years through ten years
    
    
    733,921
    
    
    
    743,907After ten years
    
    
    67,903
    
    
    
    67,724Total debt securities
    
    
    1,547,829
    
    
    
    1,569,600Mortgage-backed securities
    
    
    9,414,877
    
    
    
    9,611,925Asset-backed securities
    
    
    128
    
    
    
    122Other
    
    
    30,849
    
    
    
    30,972$
    10,993,683
    
    
    $
    11,212,619
   Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Faircost
    
    
    gains
    
    
    losses
    
    
    valueResidential mortgage-backed securities:Government National Mortgage Association
    
    $
    2,207
    
    
    $
    80
    
    
    $
    
    
    
    $
    2,287Federal National Mortgage Association
    
    
    18,283
    
    
    
    318
    
    
    
    
    
    
    
    18,601Federal Home Loan Mortgage Corporation
    
    
    16,100
    
    
    
    496
    
    
    
    
    
    
    
    16,596Collateralized mortgage obligations:Government National Mortgage Association
    
    
    1,584,892
    
    
    
    26,759
    
    
    
    (10,663
    )
    
    
    1,600,988Federal National Mortgage Association
    
    
    6,792
    
    
    
    58
    
    
    
    
    
    
    
    6,850Federal Home Loan Mortgage Corporation
    
    
    359,539
    
    
    
    775
    
    
    
    (11,443
    )
    
    
    348,871Total collateralized mortgage obligations
    
    
    1,951,223
    
    
    
    27,592
    
    
    
    (22,106
    )
    
    
    1,956,709Total residential mortgage-backed securities
    
    $
    1,987,813
    
    
    $
    28,486
    
    
    $
    (22,106
    )
    
    $
    1,994,193
 Note 3. Loans and Leases
  June 30,
    
    
    December 31,2011
    
    
    2010Commercial:Real estate
    
    $
    5,665,992
    
    
    $
    3,964,106Construction
    
    
    464,309
    
    
    
    406,751Business
    
    
    3,335,330
    
    
    
    2,623,079Total commercial
    
    
    9,465,631
    
    
    
    6,993,936Residential real estate
    
    
    4,270,811
    
    
    
    1,692,198Home equity
    
    
    2,160,665
    
    
    
    1,524,570Other consumer
    
    
    272,118
    
    
    
    272,710Total loans and leases
    
    
    16,169,225
    
    
    
    10,483,414Allowance for loan losses
    
    
    (107,028
    )
    
    
    (95,354
    )Total loans and leases, net
    
    $
    16,062,197
    
    
    $
    10,388,060
  17




---



##### Table of Contents



June 30,
    
    
    December 31,2011
    
    
    2010Outstanding principal balance
    
    $
    7,482,363
    
    
    $
    2,750,133Carrying amount
    
    
    7,309,530
    
    
    
    2,649,719
  Balance at January 1, 2010
    
    $
    (79,388
    )Harleysville acquisition
    
    
    (412,702
    )Accretion
    
    
    131,166Balance at December 31, 2010
    
    
    (360,924
    )NewAlliance acquisition
    
    
    (1,146,587
    )Net
reclassifications to non accretable yield
    
    
    884Accretion
    
    
    125,212Balance at June 30, 2011
    
    $
    (1,381,415
    )
      18




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##### Table of Contents



Legacy
    
    
    AcquiredCommercial
    
    
    Consumer
    
    
    Commercial
    
    
    Consumer
    
    
    Total2011Allowance for loan losses:Balance at beginning of period
    
    $
    89,001
    
    
    $
    6,353
    
    
    $
    
    
    
    $
    
    
    
    $
    95,354Provision
for loan losses
    
    
    22,644
    
    
    
    3,813
    
    
    
    882
    
    
    
    
    
    
    
    27,339Charge-offs
    
    
    (15,165
    )
    
    
    (4,072
    )
    
    
    (882
    )
    
    
    
    
    
    
    (20,119
    )Recoveries
    
    
    3,424
    
    
    
    1,030
    
    
    
    
    
    
    
    
    
    
    
    4,454Balance at end of period
    
    $
    99,904
    
    
    $
    7,124
    
    
    $
    
    
    
    $
    
    
    
    $
    107,028Allowance for loan losses:Individually evaluated for impairment
    
    $
    4,794
    
    
    $
    1,716
    
    
    $
    
    
    
    $
    
    
    
    $
    6,510Collectively evaluated for impairment
    
    
    95,110
    
    
    
    5,408
    
    
    
    
    
    
    
    
    
    
    
    100,518Total
    
    $
    99,904
    
    
    $
    7,124
    
    
    $
    
    
    
    $
    
    
    
    $
    107,028Loans receivable:Balance at end of periodIndividually evaluated for impairment
    
    $
    62,412
    
    
    $
    12,459
    
    
    $
    
    
    
    $
    
    
    
    $
    74,871Collectively evaluated for impairment
    
    
    6,015,626
    
    
    
    2,769,198
    
    
    
    
    
    
    
    
    
    
    
    8,784,824Loans acquired with deteriorated
credit quality(1)
    
    
    
    
    
    
    
    
    
    
    3,387,593
    
    
    
    3,921,937
    
    
    
    7,309,530Total
    
    $
    6,078,038
    
    
    $
    2,781,657
    
    
    $
    3,387,593
    
    
    $
    3,921,937
    
    
    $
    16,169,2252010Allowance for loan losses:Balance at beginning of period
    
    $
    82,813
    
    
    $
    5,490
    
    
    $
    
    
    
    $
    
    
    
    $
    88,303Provision for loan losses
    
    
    21,483
    
    
    
    2,648
    
    
    
    
    
    
    
    
    
    
    
    24,131Charge-offs
    
    
    (22,008
    )
    
    
    (1,924
    )
    
    
    
    
    
    
    
    
    
    
    (23,932
    )Recoveries
    
    
    1,091
    
    
    
    816
    
    
    
    
    
    
    
    
    
    
    
    1,907Balance at end of period
    
    $
    83,379
    
    
    $
    7,030
    
    
    $
    
    
    
    $
    
    
    
    $
    90,409Allowance for loan losses:Individually evaluated for impairment
    
    $
    9,272
    
    
    $
    29
    
    
    $
    
    
    
    $
    
    
    
    $
    9,301Collectively evaluated for impairment
    
    
    74,107
    
    
    
    7,001
    
    
    
    
    
    
    
    
    
    
    
    81,108Total
    
    $
    83,379
    
    
    $
    7,030
    
    
    $
    
    
    
    $
    
    
    
    $
    90,409Loans receivable:Balance at end of periodIndividually evaluated for impairment
    
    $
    48,986
    
    
    $
    10,127
    
    
    $
    
    
    
    $
    
    
    
    $
    59,113Collectively evaluated for impairment
    
    
    4,458,631
    
    
    $
    2,436,848
    
    
    
    
    
    
    
    
    
    
    
    6,895,479Loans acquired with deteriorated
credit quality(1)
    
    
    
    
    
    
    
    
    
    
    1,897,673
    
    
    
    1,112,255
    
    
    
    3,009,928Total
    
    $
    4,507,617
    
    
    $
    2,446,975
    
    
    $
    1,897,673
    
    
    $
    1,112,255
    
    
    $
    9,964,520
 (1)
    
    Includes all loans acquired subsequent to January 1, 2009.  19




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##### Table of Contents



Legacy
    
    
    AcquiredCommercial
    
    
    Consumer
    
    
    Commercial
    
    
    Consumer
    
    
    Total2011Allowance for loan losses:Balance at beginning of period
    
    $
    92,945
    
    
    $
    7,181
    
    
    $
    
    
    
    $
    
    
    
    $
    100,126Provision for loan losses
    
    
    12,377
    
    
    
    1,254
    
    
    
    808
    
    
    
    
    
    
    
    14,439Charge-offs
    
    
    (7,454
    )
    
    
    (1,874
    )
    
    
    (808
    )
    
    
    
    

    
    
    (10,136
    )Recoveries
    
    
    2,036
    
    
    
    563
    
    
    
    
    
    
    
    
    
    
    
    2,599Balance at
end of period
    
    $
    99,904
    
    
    $
    7,124
    
    
    $
    
    
    
    $
    
    
    
    $
    107,0282010Allowance for loan losses:Balance at beginning of period
    
    $
    83,873
    
    
    $
    5,615
    
    
    $
    
    
    
    $
    
    
    
    $
    89,488Provision for loan losses
    
    
    9,013
    
    
    
    1,987
    
    
    
    
    
    
    
    
    
    
    
    11,000Charge-offs
    
    
    (10,242
    )
    
    
    (1,016
    )
    
    
    
    
    
    
    
    
    
    
    (11,258
    )Recoveries
    
    
    735
    
    
    
    444
    
    
    
    
    
    
    
    
    
    
    
    1,179Balance at
end of period
    
    $
    83,379
    
    
    $
    7,030
    
    
    $
    
    
    
    $
    
    
    
    $
    90,409
   June 30,
    
    
    December 31,2011
    
    
    2010Commercial:Commercial real estate:Acquisition and development
    
    $
    780
    
    
    $
    1,870Multifamily
    
    
    6,218
    
    
    
    3,075Investment real estate
    
    
    19,537
    
    
    
    24,536Owner occupied
    
    
    16,346
    
    
    
    14,584Total commercial real estate
    
    
    42,881
    
    
    
    44,065Business
    
    
    20,021
    
    
    
    25,819Total commercial
    
    
    62,902
    
    
    
    69,884Consumer:Residential real estate
    
    
    14,484
    
    
    
    14,461Home equity
    
    
    4,748
    
    
    
    4,605Other consumer
    
    
    379
    
    
    
    373Total consumer
    
    
    19,611
    
    
    
    19,439Total
    
    $
    82,513
    
    
    $
    89,323
  20




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##### Table of Contents



2011
    
    
    2010Interest income that would have been recorded if nonaccrual loans
were performing in accordance with original terms
    
    $
    2,448
    
    
    $
    2,701Aggregate recorded investment of impaired loans with terms modified
through a troubled debt restructuring:Accruing interest
    
    
    18,794
    
    
    
    19,397Nonaccrual
    
    
    32,350
    
    
    
    17,641Total troubled debt restructurings
    
    $
    51,144
    
    
    $
    37,038
  June 30, 2011
    
    
    December 31, 2010Unpaid
    
    
    
    
    
    
    
    
    
    
    UnpaidRecorded
    
    
    principal
    
    
    Related
    
    
    Recorded
    
    
    principal
    
    
    Relatedinvestment
    
    
    balance
    
    
    allowance
    
    
    investment
    
    
    balance
    
    
    allowanceWith no related allowance recorded:Commercial:Commercial real estate:Acquisition and development
    
    $
    636
    
    
    $
    636
    
    
    $
    
    
    
    $
    311
    
    
    $
    311
    
    
    $
    Multifamily
    
    
    2,788
    
    
    
    4,356
    
    
    
    
    
    
    
    2,243
    
    
    
    7,783
    
    
    
    Investment real estate
    
    
    13,355
    
    
    
    20,338
    
    
    
    
    
    
    
    7,767
    
    
    
    14,442
    
    
    
    Owner occupied
    
    
    8,869
    
    
    
    9,628
    
    
    
    
    
    
    
    4,662
    
    
    
    7,315
    
    
    
    Total commercial real estate
    
    
    25,648
    
    
    
    34,958
    
    
    
    
    
    
    
    14,983
    
    
    
    29,851
    
    
    
    Business
    
    
    12,873
    
    
    
    18,170
    
    
    
    
    
    
    
    6,154
    
    
    
    9,403
    
    
    
    Total commercial
    
    
    38,521
    
    
    
    53,128
    
    
    
    
    
    
    
    21,137
    
    
    
    39,254
    
    
    
    Consumer:Residential real estate
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    8,855
    
    
    
    8,794
    
    
    
    Total
    
    $
    38,525
    
    
    $
    53,132
    
    
    $
    
    
    
    $
    29,992
    
    
    $
    48,048
    
    
    $
    With a related allowance recorded:Commercial:Commercial real estate:Acquisition and development
    
    $
    5,820
    
    
    $
    5,820
    
    
    $
    1,541
    
    
    $
    8,012
    
    
    $
    8,512
    
    
    $
    443Multifamily
    
    
    153
    
    
    
    3,560
    
    
    
    153
    
    
    
    388
    
    
    
    397
    
    
    
    15Investment real estate
    
    
    7,434
    
    
    
    11,531
    
    
    
    256
    
    
    
    17,451
    
    
    
    21,413
    
    
    
    1,786Owner occupied
    
    
    5,248
    
    
    
    7,268
    
    
    
    649
    
    
    
    7,365
    
    
    
    7,481
    
    
    
    1,482Total commercial real estate
    
    
    18,655
    
    
    
    28,179
    
    
    
    2,599
    
    
    
    33,216
    
    
    
    37,803
    
    
    
    3,726Business
    
    
    5,236
    
    
    
    7,571
    
    
    
    2,195
    
    
    
    17,388
    
    
    
    17,599
    
    
    
    1,594Total commercial
    
    
    23,891
    
    
    
    35,750
    
    
    
    4,794
    
    
    
    50,604
    
    
    
    55,402
    
    
    
    5,320Consumer:Residential real estate
    
    
    12,455
    
    
    
    12,378
    
    
    
    1,716
    
    
    
    2,270
    
    
    
    2,302
    
    
    
    173Total
    
    $
    36,346
    
    
    $
    48,128
    
    
    $
    6,510
    
    
    $
    52,874
    
    
    $
    57,704
    
    
    $
    5,493TotalCommercial:Commercial real estate:Acquisition and development
    
    $
    6,456
    
    
    $
    6,456
    
    
    $
    1,541
    
    
    $
    8,323
    
    
    $
    8,823
    
    
    $
    443Multifamily
    
    
    2,941
    
    
    
    7,916
    
    
    
    153
    
    
    
    2,631
    
    
    
    8,180
    
    
    
    15Investment real estate
    
    
    20,789
    
    
    
    31,869
    
    
    
    256
    
    
    
    25,218
    
    
    
    35,855
    
    
    
    1,786Owner occupied
    
    
    14,117
    
    
    
    16,896
    
    
    
    649
    
    
    
    12,027
    
    
    
    14,796
    
    
    
    1,482Total commercial real estate
    
    
    44,303
    
    
    
    63,137
    
    
    
    2,599
    
    
    
    48,199
    
    
    
    67,654
    
    
    
    3,726Business
    
    
    18,109
    
    
    
    25,741
    
    
    
    2,195
    
    
    
    23,542
    
    
    
    27,002
    
    
    
    1,594Total commercial
    
    
    62,412
    
    
    
    88,878
    
    
    
    4,794
    
    
    
    71,741
    
    
    
    94,656
    
    
    
    5,320Consumer:Residential real estate
    
    
    12,459
    
    
    
    12,382
    
    
    
    1,716
    
    
    
    11,125
    
    
    
    11,096
    
    
    
    173Total
    
    $
    74,871
    
    
    $
    101,260
    
    
    $
    6,510
    
    
    $
    82,866
    
    
    $
    105,752
    
    
    $
    5,493
  21




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##### Table of Contents



Commercial
    
    
    Consumer
    
    
    TotalJune 30, 2011:Nonaccrual loans
    
    $
    62,902
    
    
    $
    19,611
    
    
    $
    82,513Plus: Accruing TDRs
    
    
    7,885
    
    
    
    10,909
    
    
    
    18,794Less: Smaller balance nonaccrual loans evaluated collectively
when determining the allowance for loan losses
    
    
    (8,375
    )
    
    
    (18,061
    )
    
    
    (26,436
    )Total impaired loans
    
    $
    62,412
    
    
    $
    12,459
    
    
    $
    74,871December 31, 2010:Nonaccrual loans
    
    $
    69,884
    
    
    $
    19,439
    
    
    $
    89,323Plus: Accruing TDRs
    
    
    10,713
    
    
    
    10,894
    
    
    
    21,607Less: Smaller balance nonaccrual loans evaluated collectively
when determining the allowance for loan losses
    
    
    (8,856
    )
    
    
    (19,208
    )
    
    
    (28,064
    )Total impaired loans
    
    $
    71,741
    
    
    $
    11,125
    
    
    $
    82,866
  2011
    
    
    2010Average
    
    
    Interest
    
    
    Average
    
    
    Interestrecorded
    
    
    income
    
    
    recorded
    
    
    incomeinvestment
    
    
    recognized
    
    
    investment
    
    
    recognizedCommercial:Commercial real estate:Acquisition and development
    
    $
    7,290
    
    
    $
    58
    
    
    $
    8,890
    
    
    $
    198Multifamily
    
    
    2,935
    
    
    
    67
    
    
    
    1,808
    
    
    
    Investment real estate
    
    
    22,251
    
    
    
    44
    
    
    
    24,285
    
    
    
    32Owner occupied
    
    
    14,517
    
    
    
    21
    
    
    
    6,657
    
    
    
    48Total commercial real estate
    
    
    46,993
    
    
    
    190
    
    
    
    41,640
    
    
    
    278Business
    
    
    22,249
    
    
    
    35
    
    
    
    6,032
    
    
    
    23Total commercial
    
    
    69,242
    
    
    
    225
    
    
    
    47,672
    
    
    
    301Consumer:Residential real estate
    
    
    12,337
    
    
    
    288
    
    
    
    9,855
    
    
    
    62Total
    
    $
    81,579
    
    
    $
    513
    
    
    $
    57,527
    
    
    $
    363
  22




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##### Table of Contents



2011
    
    
    2010Average
    
    
    Interest
    
    
    Average
    
    
    Interestrecorded
    
    
    income
    
    
    recorded
    
    
    incomeinvestment
    
    
    recognized
    
    
    investment
    
    
    recognizedCommercial:Commercial real estate:Acquisition and development
    
    $
    7,301
    
    
    $
    
    
    
    $
    7,732
    
    
    $
    90Multifamily
    
    
    2,940
    
    
    
    28
    
    
    
    2,984
    
    
    
    Investment real estate
    
    
    21,951
    
    
    
    14
    
    
    
    26,487
    
    
    
    8Owner occupied
    
    
    13,028
    
    
    
    12
    
    
    
    10,281
    
    
    
    2Total commercial real estate
    
    
    45,220
    
    
    
    54
    
    
    
    47,484
    
    
    
    100Business
    
    
    20,590
    
    
    
    23
    
    
    
    10,094
    
    
    
    10Total commercial
    
    
    65,810
    
    
    
    77
    
    
    
    57,578
    
    
    
    110Consumer:Residential real estate
    
    
    13,128
    
    
    
    93
    
    
    
    9,359
    
    
    
    37Total
    
    $
    78,938
    
    
    $
    170
    
    
    $
    66,937
    
    
    $
    147
  23




---



##### Table of Contents



30-59 days
    
    
    60-89 days
    
    
    Greater than 90
    
    
    Total
    
    
    
    
    
    
    Total loans
    
    
    Greater than 90June 30, 2011
    
    past due
    
    
    past due
    
    
    days past due
    
    
    past due
    
    
    Current
    
    
    receivable
    
    
    days and accruingLegacy loansCommercial:Commercial real estate:Acquisition and development
    
    $
    
    
    
    $
    
    
    
    $
    636
    
    
    $
    636
    
    
    $
    101,033
    
    
    $
    101,669
    
    
    $
    Multifamily
    
    
    1,216
    
    
    
    
    
    
    
    335
    
    
    
    1,551
    
    
    
    1,074,847
    
    
    
    1,076,398
    
    
    
    Investment real estate
    
    
    1,121
    
    
    
    
    
    
    
    13,357
    
    
    
    14,478
    
    
    
    1,528,215
    
    
    
    1,542,693
    
    
    
    Owner occupied
    
    
    2,807
    
    
    
    84
    
    
    
    10,586
    
    
    
    13,477
    
    
    
    941,220
    
    
    
    954,697
    
    
    
    Total commercial real
estate
    
    
    5,144
    
    
    
    84
    
    
    
    24,914
    
    
    
    30,142
    
    
    
    3,645,315
    
    
    
    3,675,457
    
    
    
    Business
    
    
    3,394
    
    
    
    2,698
    
    
    
    5,681
    
    
    
    11,773
    
    
    
    2,390,808
    
    
    
    2,402,581
    
    
    
    Total commercial
    
    
    8,538
    
    
    
    2,782
    
    
    
    30,595
    
    
    
    41,915
    
    
    
    6,036,123
    
    
    
    6,078,038
    
    
    
    Consumer:Residential real estate
    
    
    11,176
    
    
    
    2,205
    
    
    
    12,527
    
    
    
    25,908
    
    
    
    1,588,488
    
    
    
    1,614,396
    
    
    
    Home equity
    
    
    2,368
    
    
    
    2,061
    
    
    
    4,478
    
    
    
    8,907
    
    
    
    1,005,511
    
    
    
    1,014,418
    
    
    
    Other consumer
    
    
    1,139
    
    
    
    504
    
    
    
    346
    
    
    
    1,989
    
    
    
    150,854
    
    
    
    152,843
    
    
    
    Total consumer
    
    
    14,683
    
    
    
    4,770
    
    
    
    17,351
    
    
    
    36,804
    
    
    
    2,744,853
    
    
    
    2,781,657
    
    
    
    Total
    
    $
    23,221
    
    
    $
    7,552
    
    
    $
    47,946
    
    
    $
    78,719
    
    
    $
    8,780,976
    
    
    $
    8,859,695
    
    
    $
    Acquired loansCommercial:Commercial real estate:Acquisition and development
    
    $
    18
    
    
    $
    
    
    
    $
    1,573
    
    
    $
    1,591
    
    
    $
    14,423
    
    
    $
    16,014
    
    
    $
    1,573Multifamily
    
    
    
    
    
    
    301
    
    
    
    857
    
    
    
    1,158
    
    
    
    234,061
    
    
    
    235,219
    
    
    
    857Investment real estate
    
    
    5,894
    
    
    
    
    
    
    
    27,959
    
    
    
    33,853
    
    
    
    1,051,816
    
    
    
    1,085,669
    
    
    
    27,959Owner occupied
    
    
    4,849
    
    
    
    5,230
    
    
    
    17,278
    
    
    
    27,357
    
    
    
    1,090,585
    
    
    
    1,117,942
    
    
    
    17,278Total commercial real
estate
    
    
    10,761
    
    
    
    5,531
    
    
    
    47,667
    
    
    
    63,959
    
    
    
    2,390,885
    
    
    
    2,454,844
    
    
    
    47,667Business
    
    
    5,587
    
    
    
    623
    
    
    
    10,863
    
    
    
    17,073
    
    
    
    915,676
    
    
    
    932,749
    
    
    
    10,863Total commercial
    
    
    16,348
    
    
    
    6,154
    
    
    
    58,530
    
    
    
    81,032
    
    
    
    3,306,561
    
    
    
    3,387,593
    
    
    
    58,530Consumer:Residential real estate
    
    
    17,129
    
    
    
    14,835
    
    
    
    58,605
    
    
    
    90,569
    
    
    
    2,565,846
    
    
    
    2,656,415
    
    
    
    58,605Home equity
    
    
    8,639
    
    
    
    5,061
    
    
    
    15,965
    
    
    
    29,665
    
    
    
    1,116,582
    
    
    
    1,146,247
    
    
    
    15,965Other consumer
    
    
    1,955
    
    
    
    1,189
    
    
    
    1,769
    
    
    
    4,913
    
    
    
    114,362
    
    
    
    119,275
    
    
    
    1,769Total consumer
    
    
    27,723
    
    
    
    21,085
    
    
    
    76,339
    
    
    
    125,147
    
    
    
    3,796,790
    
    
    
    3,921,937
    
    
    
    76,339Total
    
    $
    44,071
    
    
    $
    27,239
    
    
    $
    134,869
    
    
    $
    206,179
    
    
    $
    7,103,351
    
    
    $
    7,309,530
    
    
    $
    134,869
  24




---



##### Table of Contents



30-59 days
    
    
    60-89 days
    
    
    Greater than 90
    
    
    Total
    
    
    
    
    
    
    Total loans
    
    
    Greater than 90December 31, 2010
    
    past due
    
    
    past due
    
    
    days past due
    
    
    past due
    
    
    Current
    
    
    receivable
    
    
    days and accruingLegacy loansCommercial:Commercial real estate:Acquisition and development
    
    $
    
    
    
    $
    
    
    
    $
    1,722
    
    
    $
    1,722
    
    
    $
    112,102
    
    
    $
    113,824
    
    
    $
    Multifamily
    
    
    
    
    
    
    
    
    
    
    601
    
    
    
    601
    
    
    
    948,519
    
    
    
    949,120
    
    
    
    Investment real estate
    
    
    954
    
    
    
    750
    
    
    
    17,891
    
    
    
    19,595
    
    
    
    1,521,444
    
    
    
    1,541,039
    
    
    
    Owner occupied
    
    
    347
    
    
    
    604
    
    
    
    9,477
    
    
    
    10,428
    
    
    
    749,393
    
    
    
    759,821
    
    
    
    Total commercial real
estate
    
    
    1,301
    
    
    
    1,354
    
    
    
    29,691
    
    
    
    32,346
    
    
    
    3,331,458
    
    
    
    3,363,804
    
    
    
    Business
    
    
    2,126
    
    
    
    1,027
    
    
    
    7,634
    
    
    
    10,787
    
    
    
    1,960,582
    
    
    
    1,971,369
    
    
    
    Total commercial
    
    
    3,427
    
    
    
    2,381
    
    
    
    37,325
    
    
    
    43,133
    
    
    
    5,292,040
    
    
    
    5,335,173
    
    
    
    Consumer:Residential real estate
    
    
    5,228
    
    
    
    3,571
    
    
    
    14,138
    
    
    
    22,937
    
    
    
    1,404,136
    
    
    
    1,427,073
    
    
    
    Home equity
    
    
    2,450
    
    
    
    1,328
    
    
    
    4,551
    
    
    
    8,329
    
    
    
    915,388
    
    
    
    923,717
    
    
    
    Other consumer
    
    
    1,262
    
    
    
    413
    
    
    
    301
    
    
    
    1,976
    
    
    
    145,756
    
    
    
    147,732
    
    
    
    Total consumer
    
    
    8,940
    
    
    
    5,312
    
    
    
    18,990
    
    
    
    33,242
    
    
    
    2,465,280
    
    
    
    2,498,522
    
    
    
    Total
    
    $
    12,367
    
    
    $
    7,693
    
    
    $
    56,315
    
    
    $
    76,375
    
    
    $
    7,757,320
    
    
    $
    7,833,695
    
    
    $
    Acquired loansCommercial:Commercial real estate:Acquisition and development
    
    $
    3,840
    
    
    $
    1,355
    
    
    $
    1,355
    
    
    $
    6,550
    
    
    $
    14,797
    
    
    $
    21,347
    
    
    $
    1,355Multifamily
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    190
    
    
    
    133,291
    
    
    
    133,481
    
    
    
    190Investment real estate
    
    
    1,554
    
    
    
    422
    
    
    
    23,770
    
    
    
    25,746
    
    
    
    295,349
    
    
    
    321,095
    
    
    
    23,770Owner occupied
    
    
    1,481
    
    
    
    497
    
    
    
    7,344
    
    
    
    9,322
    
    
    
    521,808
    
    
    
    531,130
    
    
    
    7,344Total commercial real
estate
    
    
    6,875
    
    
    
    2,274
    
    
    
    32,659
    
    
    
    41,808
    
    
    
    965,245
    
    
    
    1,007,053
    
    
    
    32,659Business
    
    
    1,423
    
    
    
    1,299
    
    
    
    6,354
    
    
    
    9,076
    
    
    
    642,634
    
    
    
    651,710
    
    
    
    6,354Total commercial
    
    
    8,298
    
    
    
    3,573
    
    
    
    39,013
    
    
    
    50,884
    
    
    
    1,607,879
    
    
    
    1,658,763
    
    
    
    39,013Consumer:Residential real estate
    
    
    2,321
    
    
    
    2,200
    
    
    
    5,514
    
    
    
    10,035
    
    
    
    255,090
    
    
    
    265,125
    
    
    
    5,514Home equity
    
    
    7,158
    
    
    
    2,741
    
    
    
    12,168
    
    
    
    22,067
    
    
    
    578,786
    
    
    
    600,853
    
    
    
    12,168Other consumer
    
    
    2,617
    
    
    
    750
    
    
    
    1,402
    
    
    
    4,769
    
    
    
    120,209
    
    
    
    124,978
    
    
    
    1,402Total consumer
    
    
    12,096
    
    
    
    5,691
    
    
    
    19,084
    
    
    
    36,871
    
    
    
    954,085
    
    
    
    990,956
    
    
    
    19,084Total
    
    $
    20,394
    
    
    $
    9,264
    
    
    $
    58,097
    
    
    $
    87,755
    
    
    $
    2,561,964
    
    
    $
    2,649,719
    
    
    $
    58,097
  25




---



##### Table of Contents



Commercial real estateAcquisition and
    
    
    
    
    
    
    Investment real
    
    
    Owner
    
    
    
    
    
    
    
    
    
    
    Percent ofdevelopment
    
    
    Multifamily
    
    
    estate
    
    
    occupied
    
    
    Business
    
    
    Total
    
    
    TotalJune 30, 2011Legacy loans:Pass
    
    $
    24,680
    
    
    $
    1,044,473
    
    
    $
    1,349,620
    
    
    $
    857,731
    
    
    $
    2,153,652
    
    
    $
    5,430,156
    
    
    
    89.3
    %Criticized:(1)Accrual
    
    
    76,209
    
    
    
    25,707
    
    
    
    173,536
    
    
    
    80,620
    
    
    
    228,908
    
    
    
    584,980
    
    
    
    9.6
    %Nonaccrual
    
    
    780
    
    
    
    6,218
    
    
    
    19,537
    
    
    
    16,346
    
    
    
    20,021
    
    
    
    62,902
    
    
    
    1.1
    %Total criticized
    
    
    76,989
    
    
    
    31,925
    
    
    
    193,073
    
    
    
    96,966
    
    
    
    248,929
    
    
    
    647,882
    
    
    
    10.7
    %Total
    
    $
    101,669
    
    
    $
    1,076,398
    
    
    $
    1,542,693
    
    
    $
    954,697
    
    
    $
    2,402,581
    
    
    $
    6,078,038
    
    
    
    100.0
    %Acquired loans:Pass
    
    $
    1,786
    
    
    $
    199,681
    
    
    $
    973,230
    
    
    $
    938,996
    
    
    $
    791,139
    
    
    $
    2,904,832
    
    
    
    85.7
    %Criticized:(1)Accrual
    
    
    14,228
    
    
    
    35,538
    
    
    
    112,439
    
    
    
    178,946
    
    
    
    141,610
    
    
    
    482,761
    
    
    
    14.3
    %Nonaccrual(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total criticized
    
    
    14,228
    
    
    
    35,538
    
    
    
    112,439
    
    
    
    178,946
    
    
    
    141,610
    
    
    
    482,761
    
    
    
    14.3
    %Total
    
    $
    16,014
    
    
    $
    235,219
    
    
    $
    1,085,669
    
    
    $
    1,117,942
    
    
    $
    932,749
    
    
    $
    3,387,593
    
    
    
    100.0
    %December 31, 2010Legacy loans:Pass
    
    $
    31,533
    
    
    $
    918,441
    
    
    $
    1,358,263
    
    
    $
    680,764
    
    
    $
    1,753,412
    
    
    $
    4,742,413
    
    
    
    88.9
    %Criticized:(1)Accrual
    
    
    80,421
    
    
    
    27,604
    
    
    
    158,240
    
    
    
    64,473
    
    
    
    192,138
    
    
    
    522,876
    
    
    
    9.8
    %Nonaccrual
    
    
    1,870
    
    
    
    3,075
    
    
    
    24,536
    
    
    
    14,584
    
    
    
    25,819
    
    
    
    69,884
    
    
    
    1.3
    %Total criticized
    
    
    82,291
    
    
    
    30,679
    
    
    
    182,776
    
    
    
    79,057
    
    
    
    217,957
    
    
    
    592,760
    
    
    
    11.1
    %Total
    
    $
    113,824
    
    
    $
    949,120
    
    
    $
    1,541,039
    
    
    $
    759,821
    
    
    $
    1,971,369
    
    
    $
    5,335,173
    
    
    
    100.0
    %Acquired loans:Pass
    
    $
    691
    
    
    $
    131,155
    
    
    $
    235,973
    
    
    $
    443,856
    
    
    $
    546,433
    
    
    $
    1,358,108
    
    
    
    81.9
    %Criticized:(1)Accrual
    
    
    20,656
    
    
    
    2,326
    
    
    
    85,122
    
    
    
    87,274
    
    
    
    105,277
    
    
    
    300,655
    
    
    
    18.1
    %Nonaccrual(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total criticized
    
    
    20,656
    
    
    
    2,326
    
    
    
    85,122
    
    
    
    87,274
    
    
    
    105,277
    
    
    
    300,655
    
    
    
    18.1
    %Total
    
    $
    21,347
    
    
    $
    133,481
    
    
    $
    321,095
    
    
    $
    531,130
    
    
    $
    651,710
    
    
    $
    1,658,763
    
    
    
    100.0
    %
 (1)
    
    Includes special mention, substandard, doubtful, and loss, which are
consistent with regulatory definitions, and as described in Item 1, Business, under the
heading Classification of Assets in our Annual Report on 10-K for the year ended December
31, 2010.(2)
    
    Acquired loans were originally recorded at fair value upon acquisition. These
loans are considered to be accruing as we can reasonably estimate future cash flows on these
acquired loans and we expect to fully collect the carrying value of these loans. Therefore,
we are accreting the difference between the carrying value of these loans and their expected
cash flows.  26




---



##### Table of Contents



Residential
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Percent ofreal estate
    
    
    Home equity
    
    
    consumer
    
    
    Total
    
    
    TotalJune 30, 2011Legacy loans by refreshed FICO score:Over 700
    
    $
    1,267,456
    
    
    $
    777,045
    
    
    $
    70,534
    
    
    $
    2,115,035
    
    
    
    76.1
    %660-700
    
    
    153,202
    
    
    
    126,575
    
    
    
    21,363
    
    
    
    301,140
    
    
    
    10.8
    %620-660
    
    
    76,468
    
    
    
    50,125
    
    
    
    12,435
    
    
    
    139,028
    
    
    
    5.0
    %580-620
    
    
    39,774
    
    
    
    21,240
    
    
    
    14,839
    
    
    
    75,853
    
    
    
    2.7
    %Less than 580
    
    
    63,594
    
    
    
    32,009
    
    
    
    10,581
    
    
    
    106,184
    
    
    
    3.8
    %No score
    
    
    13,902
    
    
    
    7,424
    
    
    
    23,091
    
    
    
    44,417
    
    
    
    1.6
    %Total
    
    $
    1,614,396
    
    
    $
    1,014,418
    
    
    $
    152,843
    
    
    $
    2,781,657
    
    
    
    100.0
    %Acquired loans by refreshed FICO score:Over 700
    
    $
    1,934,834
    
    
    $
    825,234
    
    
    $
    49,796
    
    
    $
    2,809,864
    
    
    
    71.7
    %660-700
    
    
    216,045
    
    
    
    133,020
    
    
    
    17,302
    
    
    
    366,367
    
    
    
    9.3
    %620-660
    
    
    86,579
    
    
    
    59,292
    
    
    
    10,065
    
    
    
    155,936
    
    
    
    4.0
    %580-620
    
    
    258,744
    
    
    
    6,845
    
    
    
    6,251
    
    
    
    271,840
    
    
    
    6.9
    %Less than 580
    
    
    116,606
    
    
    
    49,373
    
    
    
    9,125
    
    
    
    175,104
    
    
    
    4.5
    %No score
    
    
    43,607
    
    
    
    72,483
    
    
    
    26,736
    
    
    
    142,826
    
    
    
    3.6
    %Total
    
    $
    2,656,415
    
    
    $
    1,146,247
    
    
    $
    119,275
    
    
    $
    3,921,937
    
    
    
    100.0
    %December 31, 2010Legacy loans by refreshed FICO score:Over 700
    
    $
    1,092,172
    
    
    $
    705,211
    
    
    $
    72,524
    
    
    $
    1,869,907
    
    
    
    74.8
    %660-700
    
    
    138,265
    
    
    
    112,141
    
    
    
    21,017
    
    
    
    271,423
    
    
    
    10.9
    %620-660
    
    
    73,488
    
    
    
    45,887
    
    
    
    13,242
    
    
    
    132,617
    
    
    
    5.3
    %580-620
    
    
    40,409
    
    
    
    20,530
    
    
    
    7,673
    
    
    
    68,612
    
    
    
    2.7
    %Less than 580
    
    
    67,096
    
    
    
    32,867
    
    
    
    11,320
    
    
    
    111,283
    
    
    
    4.5
    %No score
    
    
    15,643
    
    
    
    7,081
    
    
    
    21,956
    
    
    
    44,680
    
    
    
    1.8
    %Total
    
    $
    1,427,073
    
    
    $
    923,717
    
    
    $
    147,732
    
    
    $
    2,498,522
    
    
    
    100.0
    %Acquired loans by refreshed FICO score:Over 700
    
    $
    139,706
    
    
    $
    400,341
    
    
    $
    54,765
    
    
    $
    594,812
    
    
    
    60.0
    %660-700
    
    
    29,981
    
    
    
    64,904
    
    
    
    18,076
    
    
    
    112,961
    
    
    
    11.4
    %620-660
    
    
    15,272
    
    
    
    34,267
    
    
    
    9,253
    
    
    
    58,792
    
    
    
    5.9
    %580-620
    
    
    17,482
    
    
    
    26,287
    
    
    
    5,516
    
    
    
    49,285
    
    
    
    5.0
    %Less than 580
    
    
    22,859
    
    
    
    46,528
    
    
    
    11,511
    
    
    
    80,898
    
    
    
    8.2
    %No score
    
    
    39,825
    
    
    
    28,526
    
    
    
    25,857
    
    
    
    94,208
    
    
    
    9.5
    %Total
    
    $
    265,125
    
    
    $
    600,853
    
    
    $
    124,978
    
    
    $
    990,956
    
    
    
    100.0
    %
  June 30,
    
    
    December 31,2011
    
    
    2010Mortgages serviced for others
    
    $
    1,834,004
    
    
    $
    1,554,083Mortgage servicing rights
    
    
    14,989
    
    
    
    12,591
  27




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##### Table of Contents



Note 4. Derivative Financial Instruments
   Asset derivatives
    
    
    Liability derivativesNotional
    
    
    Fair
    
    
    Notional
    
    
    Fairamount
    
    
    Value (1)
    
    
    amount
    
    
    Value (2)June 30, 2011Derivatives designated as hedging instruments:Interest rate swap agreements
    
    $
    600,000
    
    
    $
    1,954
    
    
    $
    765,599
    
    
    $
    6,516Derivatives not designated as hedging instruments:Interest rate swap agreements
    
    
    599,453
    
    
    
    30,886
    
    
    
    602,394
    
    
    
    31,262Total derivatives
    
    $
    1,199,453
    
    
    $
    32,840
    
    
    $
    1,367,993
    
    
    $
    37,778December 31, 2010Derivatives designated as hedging instruments:Interest rate swap agreements
    
    $
    500,000
    
    
    $
    5,856
    
    
    $
    65,912
    
    
    $
    3,040Derivatives not designated as hedging instruments:Interest rate swap agreements
    
    
    416,520
    
    
    
    24,331
    
    
    
    416,520
    
    
    
    24,466Total derivatives
    
    $
    916,520
    
    
    $
    30,187
    
    
    $
    482,432
    
    
    $
    27,506
 (1)
    
    Included in Other assets in our Consolidated Statements of Condition.(2)
    
    Included in Other liabilities in our Consolidated Statements of Condition. Derivatives designated in hedging relationships
    28




---



##### Table of Contents



Three months ended June 30,
    
    
    Six months ended June 30,Fair Value Hedges(1)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Interest rate swap agreements:Amount of (loss) gain  on derivative instruments (2)
    
    $
    (228
    )
    
    $
    (330
    )
    
    $
    9
    
    
    $
    (478
    )
 (1)
    
    Hedged items in designated fair value relationships are loans.(2)
    
    Recognized in other noninterest income in our Consolidated Statements of Income. Three months ended June 30,
    
    
    Six months ended June 30,Cash Flow Hedges
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Interest rate swap agreements:Amount of (loss) gain on derivatives recognized in other
comprehensive income, net of tax
    
    $
    (6,065
    )
    
    $
    161
    
    
    $
    (4,501
    )
    
    $
    170Amount of loss on derivatives reclassified from
other comprehensive income to income(1)
    
    
    (1,550
    )
    
    
    (389
    )
    
    
    (2,619
    )
    
    
    (781
    )
 (1)
    
    Recognized in interest expense on borrowings in our Consolidated Statements of
Income. Derivatives not designated in hedging relationships
   Three months ended June 30,
    
    
    Six months ended June 30,Derivatives not designated as hedging instruments
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Loss on interest rate swap agreements (1)
    
    $
    (190
    )
    
    $
    (278
    )
    
    $
    (242
    )
    
    $
    (146
    )Fee income earned (1)
    
    
    834
    
    
    
    199
    
    
    
    3,062
    
    
    
    214
 (1)
    
    Recognized in other noninterest income in our Consolidated Statements of
Income. Note 5. Income Taxes
   Balance at beginning of period
    
    $
    8,299Additions for tax positions of prior year recorded due to current year acquisitions
    
    
    260Reductions for tax positions of prior years
    
    
    (6,089
    )Balance at end of period
    
    $
    2,470
  29




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##### Table of Contents



Note 6. Restructuring Charges
    Note 7. Earnings Per Share
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net income
    
    $
    13,550
    
    
    $
    20,003
    
    
    $
    58,468
    
    
    $
    48,902Less income allocable to unvested restricted stock awards
    
    
    130
    
    
    
    44
    
    
    
    223
    
    
    
    116Net income allocable to common stockholders
    
    $
    13,420
    
    
    $
    19,959
    
    
    $
    58,245
    
    
    $
    48,786Weighted average common shares outstanding:Total shares issued
    
    
    293,598
    
    
    
    213,321
    
    
    
    254,568
    
    
    
    204,117Unallocated employee stock ownership plan shares
    
    
    (2,561
    )
    
    
    (2,802
    )
    
    
    (2,591
    )
    
    
    (2,831
    )Unvested restricted stock awards
    
    
    (786
    )
    
    
    (485
    )
    
    
    (675
    )
    
    
    (480
    )Treasury shares
    
    
    (8,755
    )
    
    
    (6,072
    )
    
    
    (7,284
    )
    
    
    (6,212
    )Total basic weighted average common shares outstanding
    
    
    281,496
    
    
    
    203,962
    
    
    
    244,018
    
    
    
    194,594Incremental shares from assumed exercise of stock options
    
    
    522
    
    
    
    249
    
    
    
    550
    
    
    
    295Incremental shares from assumed vesting of restricted stock awards
    
    
    402
    
    
    
    191
    
    
    
    346
    
    
    
    193Total diluted weighted average common shares outstanding
    
    
    282,420
    
    
    
    204,402
    
    
    
    244,914
    
    
    
    195,082Basic earnings per common share
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.24
    
    
    $
    0.25Diluted earnings per common share
    
    $
    0.05
    
    
    $
    0.10
    
    
    $
    0.24
    
    
    $
    0.25Anti-dilutive stock options and restricted stock awards excluded
from the diluted weighted average common share calculations
    
    
    1,963
    
    
    
    1,705
    
    
    
    1,923
    
    
    
    1,297
  30




---



##### Table of Contents



Note 8. Other Comprehensive Income
  Pretax
    
    
    Income taxes
    
    
    Net2011:Securities available for sale:Net unrealized holding gains arising during the period
    
    $
    58,312
    
    
    $
    22,292
    
    
    $
    36,020Reclassification adjustment for net unrealized holding gains on securities
transferred to held to maturity
    
    
    (6,380
    )
    
    
    (2,424
    )
    
    
    (3,956
    )Net unrealized losses on securities available for sale
    
    
    51,932
    
    
    
    19,868
    
    
    
    32,064Net unrealized holding gains on securities transferred from available
for sale to held to maturity:Net unrealized holding gains transferred during the period
    
    
    6,380
    
    
    
    2,424
    
    
    
    3,956Less: amortization of net unrealized holding gains to income during
the period
    
    
    (656
    )
    
    
    (249
    )
    
    
    (407
    )5,724
    
    
    
    2,175
    
    
    
    3,549Interest rate swaps designated as cash flow hedges:Net unrealized losses arising during the period
    
    
    (10,007
    )
    
    
    (3,882
    )
    
    
    (6,125
    )Reclassification adjustment for realized losses included in net income
    
    
    2,619
    
    
    
    995
    
    
    
    1,624Net unrealized losses on interest rate swaps designated as cash flow hedges
    
    
    (7,388
    )
    
    
    (2,887
    )
    
    
    (4,501
    )Amortization of net gain related to pension and post-retirement plans
    
    
    666
    
    
    
    107
    
    
    
    559Total other comprehensive income
    
    $
    50,934
    
    
    $
    19,263
    
    
    $
    31,6712010:Securities available for sale:Unrealized holding gains arising during the period
    
    $
    165,943
    
    
    $
    65,727
    
    
    $
    100,216Interest rate swaps designated as cash flow hedges:Net unrealized losses arising during the period
    
    
    (457
    )
    
    
    (143
    )
    
    
    (314
    )Reclassification adjustment for realized losses included in net income
    
    
    781
    
    
    
    297
    
    
    
    484Net unrealized gains on interest rate swaps designated as cash flow hedges
    
    
    324
    
    
    
    154
    
    
    
    170Amortization of net gain related to pension and post-retirement plans
    
    
    517
    
    
    
    559
    
    
    
    (42
    )Total other comprehensive income
    
    $
    166,784
    
    
    $
    66,440
    
    
    $
    100,344
  Net unrealized gainson securities
    
    
    Unrealized gains (losses)Net unrealized gains
    
    
    transferred from
    
    
    on interest rate swapson securities
    
    
    available for sale to
    
    
    designated as cash flow
    
    
    Defined benefitavailable for sale
    
    
    held to maturity
    
    
    hedges
    
    
    plans
    
    
    TotalBalance, January 1, 2011
    
    $
    70,690
    
    
    $
    
    
    
    $
    2,978
    
    
    $
    (15,797
    )
    
    $
    57,871Period change, net of tax
    
    
    32,064
    
    
    
    3,549
    
    
    
    (4,501
    )
    
    
    559
    
    
    
    31,671Balance June 30, 2011
    
    $
    102,754
    
    
    $
    3,549
    
    
    $
    (1,523
    )
    
    $
    (15,238
    )
    
    $
    89,542Balance, January 1, 2010
    
    $
    17,206
    
    
    $
    
    
    
    $
    (1,154
    )
    
    $
    (13,538
    )
    
    $
    2,514Period change, net of tax
    
    
    100,216
    
    
    
    
    
    
    
    170
    
    
    
    (42
    )
    
    
    100,344Balance June 30, 2010
    
    $
    117,422
    
    
    $
    
    
    
    $
    (984
    )
    
    $
    (13,580
    )
    
    $
    102,858
 Note 9. Fair Value Measurements
  Level 1 Inputs
  31




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##### Table of Contents



Level 2 Inputs
 Level 3 Inputs
   Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Fair Value MeasurementsTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3June 30, 2011Assets:Investment securities available for sale:Debt securities:States and political subdivisions
    
    $
    687,734
    
    
    $
    
    
    
    $
    687,734
    
    
    $
    U.S. government agencies
    
    
    5,815
    
    
    
    
    
    
    
    5,815
    
    
    
    U.S. government sponsored enterprises
    
    
    638,584
    
    
    
    
    
    
    
    638,584
    
    
    
    Corporate
    
    
    208,565
    
    
    
    
    
    
    
    208,565
    
    
    
    Trust preferred securities
    
    
    28,902
    
    
    
    
    
    
    
    
    
    
    
    28,902Total debt securities
    
    
    1,569,600
    
    
    
    
    
    
    
    1,540,698
    
    
    
    28,902Mortgage-backed securities:Residential mortgage-backed securities:Government National Mortgage Association
    
    
    107,116
    
    
    
    
    
    
    
    107,116
    
    
    
    Federal National Mortgage Association
    
    
    881,663
    
    
    
    
    
    
    
    881,663
    
    
    
    Federal Home Loan Mortgage Corporation
    
    
    765,842
    
    
    
    
    
    
    
    765,842
    
    
    
    Collateralized mortgage obligations:Government National Mortgage Association
    
    
    2,765,711
    
    
    
    
    
    
    
    2,765,711
    
    
    
    Federal National Mortgage Association
    
    
    744,246
    
    
    
    
    
    
    
    744,246
    
    
    
    Federal Home Loan Mortgage Corporation
    
    
    747,840
    
    
    
    
    
    
    
    747,840
    
    
    
    Non-agency issued
    
    
    128,731
    
    
    
    
    
    
    
    128,731
    
    
    
    Total collateralized mortgage obligations
    
    
    4,386,528
    
    
    
    
    
    
    
    4,386,528
    
    
    
    Total residential mortgage-backed securities
    
    
    6,141,149
    
    
    
    
    
    
    
    6,141,149
    
    
    
    Commercial mortgage-backed securities:Non-agency issued
    
    
    477,852
    
    
    
    
    
    
    
    477,852
    
    
    
    Total mortgage-backed securities
    
    
    6,619,001
    
    
    
    
    
    
    
    6,619,001
    
    
    
    Asset-backed securities
    
    
    122
    
    
    
    
    
    
    
    122
    
    
    
    Other
    
    
    30,972
    
    
    
    14,864
    
    
    
    16,108
    
    
    
    Total securities available for sale
    
    
    8,219,695
    
    
    
    14,864
    
    
    
    8,175,929
    
    
    
    28,902Loans held for sale(1)
    
    
    51,141
    
    
    
    
    
    
    
    51,141
    
    
    
    Interest rate swaps
    
    
    32,840
    
    
    
    
    
    
    
    32,840
    
    
    
    Total assets
    
    $
    8,303,676
    
    
    $
    14,864
    
    
    $
    8,259,910
    
    
    $
    28,902Liabilities:Interest rate swaps
    
    $
    37,778
    
    
    $
    
    
    
    $
    37,778
    
    
    $
    
 (1)
    
    Represents loans for which we have elected the fair value option  32




---



##### Table of Contents



Fair Value MeasurementsTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3December 31, 2010Assets:Investment securities available for sale:Debt securities:States and political subdivisions
    
    $
    597,434
    
    
    $
    
    
    
    $
    597,434
    
    
    $
    U.S. government sponsored enterprises
    
    
    187,207
    
    
    
    
    
    
    
    187,207
    
    
    
    Corporate
    
    
    121,116
    
    
    
    
    
    
    
    120,197
    
    
    
    919Total debt securities
    
    
    905,757
    
    
    
    
    
    
    
    904,838
    
    
    
    919Mortgage-backed securities:Residential mortgage-backed securities:Government National Mortgage Association
    
    
    77,790
    
    
    
    
    
    
    
    77,790
    
    
    
    Federal National Mortgage Association
    
    
    173,139
    
    
    
    
    
    
    
    173,139
    
    
    
    Federal Home Loan Mortgage Corporation
    
    
    126,159
    
    
    
    
    
    
    
    126,159
    
    
    
    Collateralized mortgage obligations:Government National Mortgage Association
    
    
    4,548,917
    
    
    
    
    
    
    
    4,548,917
    
    
    
    Federal National Mortgage Association
    
    
    573,030
    
    
    
    
    
    
    
    573,030
    
    
    
    Federal Home Loan Mortgage Corporation
    
    
    546,152
    
    
    
    
    
    
    
    546,152
    
    
    
    Non-agency issued
    
    
    150,774
    
    
    
    
    
    
    
    150,774
    
    
    
    Total collateralized mortgage obligations
    
    
    5,818,873
    
    
    
    
    
    
    
    5,818,873
    
    
    
    Total residential mortgage-backed securities
    
    
    6,195,961
    
    
    
    
    
    
    
    6,195,961
    
    
    
    Commercial mortgage-backed securities
    
    
    162,669
    
    
    
    
    
    
    
    162,669
    
    
    
    Total mortgage-backed securities
    
    
    6,358,630
    
    
    
    
    
    
    
    6,358,630
    
    
    
    Asset-backed securities
    
    
    2,731
    
    
    
    
    
    
    
    2,731
    
    
    
    Other
    
    
    22,337
    
    
    
    14,731
    
    
    
    7,606
    
    
    
    Total securities available for sale
    
    
    7,289,455
    
    
    
    14,731
    
    
    
    7,273,805
    
    
    
    919Interest rate swaps
    
    
    30,187
    
    
    
    
    
    
    
    30,187
    
    
    
    Total assets
    
    $
    7,319,642
    
    
    $
    14,731
    
    
    $
    7,303,992
    
    
    $
    919Liabilities:Interest rate swaps
    
    $
    27,506
    
    
    $
    
    
    
    $
    27,506
    
    
    $
    
  Securities Available for Sale
    33




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##### Table of Contents



Loans held for sale
  June 30, 2011Fair value carryingFair value carrying
    
    
    Aggregate unpaid principal
    
    
    amount less aggregateamount
    
    
    balance
    
    
    unpaid principal balanceLoans held for saleTotal loans
    
    $
    51,141
    
    
    $
    49,648
    
    
    $
    1,493Nonaccrual loans
    
    
    
    
    
    
    
    
    
    
    Loans 90 days
or more past
due and still
accruing
    
    
    
    
    
    
    
    
    
    
    
 Three months ending
    
    
    Six months ending JuneJune 30, 2011
    
    
    30, 2011Gain or loss from fair
    
    
    Gain or loss from fairvalue changes(1)
    
    
    value changes(1)Loans held for saleTotal loans
    
    $
    926
    
    
    $
    926Nonaccrual loans
    
    
    
    
    
    
    Loans 90 days or more past due and still accruing
    
    
    
    
    
    
    
 (1)
    
    Classified in mortgage banking income in our Consolidated Statements of
Income Interest Rate Swaps
    2011
    
    
    2010Balance at beginning of period
    
    $
    919
    
    
    $
    480NewAlliance acquisition
    
    
    27,924
    
    
    
    Gains included in other comprehensive income
    
    
    59
    
    
    
    222Balance at end of period
    
    $
    28,902
    
    
    $
    702
   34




---



##### Table of Contents



Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  Fair Value Measurements
    
    
    Total gainsTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    (losses)2011Collateral dependent impaired loans
    
    $
    21,968
    
    
    $
    
    
    
    $
    7,622
    
    
    $
    14,346
    
    
    $
    (6,652
    )2010Collateral dependent impaired loans
    
    $
    55,396
    
    
    $
    
    
    
    $
    55,396
    
    
    $
    
    
    
    $
    1,703
 Collateral Dependent Impaired Loans
   Fair Value of Financial Instruments
  June 30, 2011
    
    
    December 31, 2010Estimated fair
    
    
    
    
    
    
    Estimated fairCarrying value
    
    
    value
    
    
    Carrying value
    
    
    valueFinancial assets:Cash and cash equivalents
    
    $
    318,820
    
    
    $
    318,820
    
    
    $
    213,820
    
    
    $
    213,820Investment securities available for sale
    
    
    8,219,695
    
    
    
    8,219,695
    
    
    
    7,289,455
    
    
    
    7,289,455Investment securities held to maturity
    
    
    2,939,933
    
    
    
    2,992,924
    
    
    
    1,025,724
    
    
    
    1,043,803Federal Home Loan Bank and
Federal Reserve Bank
common stock
    
    
    305,241
    
    
    
    305,241
    
    
    
    183,800
    
    
    
    183,800Loans held for sale
    
    
    51,141
    
    
    
    51,141
    
    
    
    37,977
    
    
    
    38,357Loans and leases, net
    
    
    16,062,197
    
    
    
    15,986,269
    
    
    
    10,388,060
    
    
    
    10,422,730Mortgage servicing rights
    
    
    14,989
    
    
    
    15,937
    
    
    
    12,591
    
    
    
    13,178Interest rate swap agreements
    
    
    32,840
    
    
    
    32,840
    
    
    
    30,187
    
    
    
    30,187Accrued interest receivable
    
    
    102,358
    
    
    
    102,358
    
    
    
    70,233
    
    
    
    70,233Financial liabilities:Deposits
    
    $
    18,900,495
    
    
    $
    18,954,611
    
    
    $
    13,148,844
    
    
    $
    13,110,504Borrowings
    
    
    7,600,926
    
    
    
    7,723,610
    
    
    
    4,893,474
    
    
    
    4,885,827Interest rate swap agreements
    
    
    37,778
    
    
    
    37,778
    
    
    
    27,506
    
    
    
    27,506Accrued interest payable
    
    
    23,873
    
    
    
    23,873
    
    
    
    13,821
    
    
    
    13,821
   35




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##### Table of Contents



Cash and Cash Equivalents
  Investment Securities
  Federal Home Loan Bank and Federal Reserve Bank Common Stock
  Loans and Leases
  Accrued Interest Receivable and Accrued Interest Payable
  Deposits
  Borrowings
  Commitments
   36




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##### Table of Contents



Note 10. Segment Information
   Financial
    
    
    ConsolidatedThree months ended:
    
    Banking
    
    
    services
    
    
    totalJune 30, 2011:Net interest income
    
    $
    230,520
    
    
    $
    (83
    )
    
    $
    230,437Provision for credit losses
    
    
    17,307
    
    
    
    
    
    
    
    17,307Net interest income after provision for credit losses
    
    
    213,213
    
    
    
    (83
    )
    
    
    213,130Noninterest income
    
    
    44,091
    
    
    
    16,804
    
    
    
    60,895Amortization of core deposit and other intangibles
    
    
    5,334
    
    
    
    1,239
    
    
    
    6,573Other noninterest expense
    
    
    234,932
    
    
    
    13,636
    
    
    
    248,568Income before income taxes
    
    
    17,038
    
    
    
    1,846
    
    
    
    18,884Income tax expense
    
    
    4,633
    
    
    
    701
    
    
    
    5,334Net income
    
    $
    12,405
    
    
    $
    1,145
    
    
    $
    13,550June 30, 2010:Net interest income
    
    $
    154,758
    
    
    $
    
    
    
    $
    154,758Provision for credit losses
    
    
    11,000
    
    
    
    
    
    
    
    11,000Net interest income after provision for credit losses
    
    
    143,758
    
    
    
    
    
    
    
    143,758Noninterest income
    
    
    33,896
    
    
    
    12,154
    
    
    
    46,050Amortization of core deposit and other intangibles
    
    
    4,647
    
    
    
    664
    
    
    
    5,311Other noninterest expense
    
    
    142,878
    
    
    
    10,014
    
    
    
    152,892Income before income taxes
    
    
    30,129
    
    
    
    1,476
    
    
    
    31,605Income tax expense
    
    
    11,012
    
    
    
    590
    
    
    
    11,602Net income
    
    $
    19,117
    
    
    $
    886
    
    
    $
    20,003
 Financial
    
    
    ConsolidatedSix months ended:
    
    Banking
    
    
    services
    
    
    totalJune 30, 2011:Net interest income
    
    $
    403,450
    
    
    $
    (145
    )
    
    $
    403,305Provision for credit losses
    
    
    30,207
    
    
    
    
    
    
    
    30,207Net interest income after provision for credit losses
    
    
    373,243
    
    
    
    (145
    )
    
    
    373,098Noninterest income
    
    
    80,374
    
    
    
    32,595
    
    
    
    112,969Amortization of core deposit and other intangibles
    
    
    9,796
    
    
    
    2,266
    
    
    
    12,062Other noninterest expense
    
    
    361,212
    
    
    
    27,017
    
    
    
    388,229Income before income taxes
    
    
    82,609
    
    
    
    3,167
    
    
    
    85,776Income tax expense
    
    
    26,104
    
    
    
    1,204
    
    
    
    27,308Net income
    
    $
    56,505
    
    
    $
    1,963
    
    
    $
    58,468June 30, 2010:Net interest income
    
    $
    268,927
    
    
    $
    
    
    
    $
    268,927Provision for credit losses
    
    
    24,131
    
    
    
    
    
    
    
    24,131Net interest income after provision for credit losses
    
    
    244,796
    
    
    
    
    
    
    
    244,796Noninterest income
    
    
    58,481
    
    
    
    24,517
    
    
    
    82,998Amortization of core deposit and other intangibles
    
    
    7,212
    
    
    
    1,346
    
    
    
    8,558Other noninterest expense
    
    
    222,833
    
    
    
    19,994
    
    
    
    242,827Income before income taxes
    
    
    73,232
    
    
    
    3,177
    
    
    
    76,409Income tax expense
    
    
    26,237
    
    
    
    1,270
    
    
    
    27,507Net income
    
    $
    46,995
    
    
    $
    1,907
    
    
    $
    48,902
  37




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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 subsidiaries 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,
changes in the credit quality of our borrowers and obligors on investment securities we own,
increased regulation of financial institutions or other effects of recently enacted legislation,
and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2010
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
   38




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##### Table of Contents



REGULATORY REFORM
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Allowance for Loan Losses
        39




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##### Table of Contents



Acquired Loans
    Investment Securities
     40




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##### Table of Contents



Goodwill
        41




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##### Table of Contents



SELECTED FINANCIAL DATA
 2011
    
    
    2010At or for the quarter ended
    
    June 30,
    
    
    March 31
    
    
    December 31
    
    
    September 30
    
    
    June 30(In thousands, except per share amounts)Selected financial condition data:Total assets
    
    $
    30,889,646
    
    
    $
    21,439,845
    
    
    $
    21,083,853
    
    
    $
    20,871,540
    
    
    $
    20,518,359Loans and leases, net
    
    
    16,062,197
    
    
    
    10,611,117
    
    
    
    10,388,060
    
    
    
    9,978,952
    
    
    
    9,874,111Investment securities:Available for sale
    
    
    8,219,695
    
    
    
    5,424,731
    (1)
    
    
    7,289,455
    
    
    
    7,341,505
    
    
    
    7,131,393Held to maturity
    
    
    2,939,933
    
    
    
    3,030,320
    (1)
    
    
    1,025,724
    
    
    
    1,125,184
    
    
    
    1,038,866Goodwill and other intangibles
    
    
    1,829,712
    
    
    
    1,108,811
    
    
    
    1,114,144
    
    
    
    1,099,446
    
    
    
    1,099,155Deposits
    
    
    18,900,495
    
    
    
    13,455,823
    
    
    
    13,148,844
    
    
    
    13,395,183
    
    
    
    13,758,174Borrowings
    
    
    7,600,926
    
    
    
    4,904,053
    
    
    
    4,893,474
    
    
    
    4,343,120
    
    
    
    3,666,557Stockholders equity
    
    $
    3,992,835
    
    
    $
    2,775,032
    
    
    $
    2,765,070
    
    
    $
    2,806,561
    
    
    $
    2,773,465Common shares outstanding
    
    
    295,245
    
    
    
    209,432
    
    
    
    209,112
    
    
    
    209,059
    
    
    
    209,040Selected operations data:Interest income
    
    $
    277,370
    
    
    $
    208,884
    
    
    $
    205,320
    
    
    $
    200,636
    
    
    $
    195,129Interest expense
    
    
    46,933
    
    
    
    36,016
    
    
    
    37,772
    
    
    
    39,357
    
    
    
    40,371Net interest income
    
    
    230,437
    
    
    
    172,868
    
    
    
    167,548
    
    
    
    161,279
    
    
    
    154,758Provision for credit losses
    
    
    17,307
    
    
    
    12,900
    
    
    
    13,500
    
    
    
    11,000
    
    
    
    11,000Net interest income after provision for credit losses
    
    
    213,130
    
    
    
    159,968
    
    
    
    154,048
    
    
    
    150,279
    
    
    
    143,758Noninterest income
    
    
    60,895
    
    
    
    52,074
    
    
    
    54,112
    
    
    
    49,505
    
    
    
    46,050Noninterest expense(2)
    
    
    255,141
    
    
    
    145,150
    
    
    
    139,334
    
    
    
    132,609
    
    
    
    158,203Income before income taxes
    
    
    18,884
    
    
    
    66,892
    
    
    
    68,826
    
    
    
    67,175
    
    
    
    31,605Income tax expense
    
    
    5,334
    
    
    
    21,974
    
    
    
    22,971
    
    
    
    21,579
    
    
    
    11,602Net income
    
    $
    13,550
    
    
    $
    44,918
    
    
    $
    45,855
    
    
    $
    45,596
    
    
    $
    20,003Stock and related per share data:Earnings per common share:Basic
    
    $
    0.05
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.10Diluted
    
    
    0.05
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    0.10Cash dividends
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.15
    
    
    
    0.14
    
    
    
    0.14Book value
    
    
    13.68
    
    
    
    13.45
    
    
    
    13.42
    
    
    
    13.63
    
    
    
    13.48Tangible book value per share(3)
    
    
    7.41
    
    
    
    8.08
    
    
    
    8.01
    
    
    
    8.29
    
    
    
    8.14Market Price (NASDAQ: FNFG):High
    
    
    14.54
    
    
    
    15.10
    
    
    
    14.40
    
    
    
    13.79
    
    
    
    14.88Low
    
    
    13.02
    
    
    
    13.54
    
    
    
    11.51
    
    
    
    11.23
    
    
    
    12.25Close
    
    $
    13.20
    
    
    $
    13.58
    
    
    $
    13.98
    
    
    $
    11.65
    
    
    $
    12.53
 (1)
    
    As of March 31, 2011 we transferred $2.0 billion of investment securities
classified as available for sale to a held to maturity classification. See Item 1, Note 2,
Investment Securities.(2)
    
    Noninterest expense includes one-time expenses related to our merger and
acquisition integration or restructuring activities of $88 million, $7 million, $6 million, $2
million, and $36 million for the quarters ended June 30, 2011, March 31, 2011, December 31,
2010, September 30, 2010, and June 30, 2010, respectively.(3)
    
    Tangible book value per share excludes goodwill and other intangible
assets of $1.8 billion, $1.1 billion, $1.1 billion, $1.1 billion, and
$1.1 billion as of June 30, 2011, March 31, 2011, December 31, 2010,
September 30, 2010, and June 30, 2010, respectively, as well as unallocated ESOP shares and unvested restricted stock shares. This is a
non-GAAP financial measure that we believe provides investors with information that is useful
in understanding our financial performance and condition.  42




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2011
    
    
    2010At or for the quarter ended
    
    June 30
    
    
    March 31
    
    
    December 31
    
    
    September 30
    
    
    June 30(Dollar amounts in thousands)Selected financial ratios and other data:Performance ratios(1):Return on average assets
    
    
    0.19
    %
    
    
    0.86
    %
    
    
    0.87
    %
    
    
    0.88
    %
    
    
    0.41
    %Return on average equity
    
    
    1.42
    
    
    
    6.56
    
    
    
    6.46
    
    
    
    6.44
    
    
    
    2.97Return on average tangible equity(2)
    
    
    2.59
    
    
    
    10.94
    
    
    
    10.64
    
    
    
    10.59
    
    
    
    5.05Net interest rate spread
    
    
    3.53
    
    
    
    3.68
    
    
    
    3.52
    
    
    
    3.47
    
    
    
    3.52Net interest rate margin
    
    
    3.65
    
    
    
    3.80
    
    
    
    3.65
    
    
    
    3.61
    
    
    
    3.68Efficiency ratio (3)
    
    
    87.6
    
    
    
    64.5
    
    
    
    62.9
    
    
    
    62.9
    
    
    
    78.8Dividend payout ratio
    
    
    320.00
    %
    
    
    72.73
    %
    
    
    68.18
    %
    
    
    63.64
    %
    
    
    140.00
    %Capital ratios:First Niagara Financial Group, Inc.Total risk-based capital
    
    
    12.69
    %
    
    
    14.13
    %
    
    
    14.35
    %
    
    
    15.09
    %
    
    
    15.09
    %Tier 1 risk-based capital
    
    
    12.05
    
    
    
    13.32
    
    
    
    13.54
    
    
    
    14.25
    
    
    
    14.27Tier 1 common capital(4)
    
    
    11.41
    
    
    
    12.56
    
    
    
    12.76
    
    
    
    13.42
    
    
    
    13.43Leverage ratio
    
    
    7.81
    
    
    
    8.21
    
    
    
    8.14
    
    
    
    8.37
    
    
    
    8.75Ratio of stockholders equity to total assets
    
    
    12.93
    
    
    
    12.94
    
    
    
    13.11
    
    
    
    13.45
    
    
    
    13.52Ratio of tangible stockholders equity
to tangible assets(5)
    
    
    7.44
    
    
    
    8.20
    
    
    
    8.27
    
    
    
    8.63
    
    
    
    8.62First Niagara Bank, N.A.:Total risk-based capital
    
    
    12.37
    
    
    
    12.04
    
    
    
    11.86
    
    
    
    12.72
    
    
    
    12.40Tier 1 risk-based capital
    
    
    11.72
    
    
    
    11.23
    
    
    
    11.06
    
    
    
    11.88
    
    
    
    11.59Leverage ratio
    
    
    7.58
    %
    
    
    6.92
    %
    
    
    6.64
    %
    
    
    6.97
    %
    
    
    7.10
    %Asset quality:Total nonaccruing loans
    
    $
    82,513
    
    
    $
    80,368
    
    
    $
    89,323
    
    
    $
    94,180
    
    
    $
    74,338Other nonperforming assets
    
    
    12,315
    
    
    
    6,955
    
    
    
    8,647
    
    
    
    8,619
    
    
    
    8,559Total classified loans(6)
    
    
    700,813
    
    
    
    564,037
    
    
    
    481,074
    
    
    
    462,902
    
    
    
    386,123Total criticized loans(7)
    
    
    1,253,937
    
    
    
    972,148
    
    
    
    942,941
    
    
    
    859,219
    
    
    
    804,045Allowance for loan losses
    
    
    107,028
    
    
    
    100,126
    
    
    
    95,354
    
    
    
    94,532
    
    
    
    90,409Net loan charge-offs
    
    $
    7,537
    
    
    $
    8,128
    
    
    $
    12,679
    
    
    $
    6,877
    
    
    $
    10,079Net charge-offs to average loans (annualized)
    
    
    0.20
    %
    
    
    0.31
    %
    
    
    0.49
    %
    
    
    0.27
    %
    
    
    0.41
    %Provision to average loans (annualized)
    
    
    0.38
    
    
    
    0.49
    
    
    
    0.53
    
    
    
    0.43
    
    
    
    0.45Total nonaccruing loans to total loans
    
    
    0.51
    
    
    
    0.75
    
    
    
    0.85
    
    
    
    0.93
    
    
    
    0.74Total nonperforming assets to total assets
    
    
    0.31
    
    
    
    0.41
    
    
    
    0.46
    
    
    
    0.49
    
    
    
    0.40Allowance for loan losses to total loans
    
    
    0.66
    
    
    
    0.93
    
    
    
    0.91
    
    
    
    0.93
    
    
    
    0.90Allowance for loan losses to legacy loans(8)
    
    
    1.20
    
    
    
    1.22
    
    
    
    1.21
    
    
    
    1.30
    
    
    
    1.29Allowance for loan losses to nonaccruing loans
    
    
    129.7
    
    
    
    124.6
    
    
    
    106.8
    
    
    
    100.4
    
    
    
    121.6Texas ratio(9)
    
    
    10.12
    %
    
    
    8.51
    %
    
    
    8.94
    %
    
    
    8.85
    %
    
    
    7.43
    %Other data:Number of branches
    
    
    346
    
    
    
    257
    
    
    
    257
    
    
    
    255
    
    
    
    255Full time equivalent employees
    
    
    4,751
    
    
    
    3,825
    
    
    
    3,791
    
    
    
    3,725
    
    
    
    3,748
 (1)
    
    Computed using daily averages. Annualized where appropriate.(2)
    
    Average tangible equity excludes average goodwill and other intangibles of $1.7
billion, $1.1 billion, $1.1 billion, $1.1 billion, and $1.1 billion, for the quarters
ended June 30, 2011, March 31, 2011, December 31, 2010, September 30, 2010, and June 30,
2010, respectively. This is a non-GAAP financial measure that we believe provides
investors with information that is useful in understanding our financial performance and
condition.(3)
    
    Computed by dividing noninterest expense by the sum of net interest income
and noninterest income.(4)
    
    Tier 1 common capital is computed by subtracting the subordinated debentures
associated with trust preferred securities from Tier I capital, divided by risk weighted
assets. Tier 1 common capital, as calculated for purposes of this financial data and the
earnings release, does not reflect the adjustments provided for in Basel III. This is a
non-GAAP financial measure that we believe provides investors with information that is
useful in understanding our financial performance and position.(5)
    
    Tangible common stockholders equity and tangible assets exclude goodwill and
other intangibles of $1.8 billion. $1.1 billion, $1.1 billion, $1.1
billion, and $1.1
billion as of June 30, 2011, March 31, 2011, December 31, 2010,
September 30, 2010, and June 30, 2010, respectively. This is a non-GAAP financial measure that we believe provides
investors with information that is useful in understanding our financial performance and
condition.  43




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##### Table of Contents



(6)
    
    Includes consumer loans, which are considered classified when they are 90
days or more past due. Classified loans include substandard, doubtful, and loss, which
are consistent with regulatory definitions, and as described in Item 1, Business, under
the heading Classification of Assets in our Annual Report on 10-K for the year ended
December 31, 2010.(7)
    
    Includes consumer loans, which are considered criticized when they are 60 days
or more past due. Criticized loans include special mention, substandard, doubtful, and
loss, which are consistent with regulatory definitions, and as described in Item 1,
Business, under the heading Classification of Assets in our Annual Report on 10-K for
the year ended December 31, 2010.(8)
    
    Legacy loans are those loans accounted for under the amortized cost method, and
do not include loans acquired subsequent to January 1, 2009. This is a non-GAAP measure
that we believe provides investors with information that is useful in understanding our
financial performance and position.(9)
    
    The Texas ratio is computed by dividing the sum of nonperforming assets and
loans 90 days past due still accruing by the sum of tangible equity and the allowance for
loan losses. This is a non-GAAP measure that we believe provides investors with
information that is useful in understanding our financial performance and position. RESULTS OF OPERATIONS
 Overview
  Three months ended
    
    
    Six months endedJune 30,
    
    
    March 31,
    
    
    June 30,
    
    
    June 30,2011
    
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Operating results:(1)Net interest income
    
    $
    230,437
    
    
    $
    172,868
    
    
    $
    154,758
    
    
    $
    403,305
    
    
    $
    268,927Provision for credit losses
    
    
    17,307
    
    
    
    12,900
    
    
    
    11,000
    
    
    
    30,207
    
    
    
    24,131Noninterest income
    
    
    60,895
    
    
    
    52,074
    
    
    
    46,050
    
    
    
    112,969
    
    
    
    82,998Noninterest expense
    
    
    166,657
    
    
    
    137,918
    
    
    
    121,612
    
    
    
    304,575
    
    
    
    208,562Income tax expense
    
    
    36,126
    
    
    
    24,350
    
    
    
    23,285
    
    
    
    60,476
    
    
    
    41,675Net operating income
    
    $
    71,242
    
    
    $
    49,774
    
    
    $
    44,911
    
    
    $
    121,016
    
    
    $
    77,557Operating earnings per diluted share
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.22
    
    
    $
    0.49
    
    
    $
    0.40Reconciliation of net operating income to net income
    
    $
    71,242
    
    
    $
    49,774
    
    
    $
    44,911
    
    
    $
    121,016
    
    
    $
    77,557Nonoperating expenses, net of tax:Merger and acquisition integration expenses
    
    
    50,092
    
    
    
    4,147
    
    
    
    24,395
    
    
    
    54,241
    
    
    
    28,148Restructuring charges
    
    
    7,600
    
    
    
    709
    
    
    
    
    
    
    
    8,307
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    513
    
    
    
    
    
    
    
    507Total nonoperating expenses, net of tax
    
    
    57,692
    
    
    
    4,856
    
    
    
    24,908
    
    
    
    62,548
    
    
    
    28,655Net income
    
    $
    13,550
    
    
    $
    44,918
    
    
    $
    20,003
    
    
    $
    58,468
    
    
    $
    48,902Earnings per diluted share
    
    $
    0.05
    
    
    $
    0.22
    
    
    $
    0.10
    
    
    $
    0.24
    
    
    $
    0.25
 (1)
    
    We believe this non-GAAP measure provides a meaningful comparison of our
underlying operational performance and facilitates investors assessments of business and
performance trends in comparison to others in the financial services industry. In addition,
we believe the exclusion of these nonoperating items enables management to perform a more
effective evaluation and comparison of our results and to assess performance in relation to
 our ongoing operations.     44




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##### Table of Contents



45




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##### Table of Contents



Net Interest Income
  Three months ended June 30,
    
    
    Increase2011
    
    
    2010
    
    
    (decrease)Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Averageoutstanding
    
    
    
    
    
    
    outstanding
    
    
    
    
    
    
    outstandingbalance
    
    
    Yield/rate
    
    
    balance
    
    
    Yield/rate
    
    
    balance
    
    
    Yield/rateInterest-earning assets:Loans and leases(1)Commercial:Real estate
    
    $
    5,807,141
    
    
    
    5.42
    %
    
    $
    4,194,002
    
    
    
    5.91
    %
    
    $
    1,613,139
    
    
    
    (0.49
    )%Business
    
    
    3,119,841
    
    
    
    4.30
    
    
    
    2,079,222
    
    
    
    5.21
    
    
    
    1,040,619
    
    
    
    (0.91
    )Total commercial lending
    
    
    8,926,982
    
    
    
    5.03
    
    
    
    6,273,224
    
    
    
    5.68
    
    
    
    2,653,758
    
    
    
    (0.65
    )Residential real estate
    
    
    3,848,440
    
    
    
    4.56
    
    
    
    1,900,471
    
    
    
    5.18
    
    
    
    1,947,969
    
    
    
    (0.62
    )Home equity
    
    
    2,038,870
    
    
    
    4.58
    
    
    
    1,374,245
    
    
    
    4.82
    
    
    
    664,625
    
    
    
    (0.24
    )Other consumer
    
    
    270,356
    
    
    
    7.10
    
    
    
    260,953
    
    
    
    6.62
    
    
    
    9,403
    
    
    
    0.48Total loans
    
    
    15,084,648
    
    
    
    4.93
    
    
    
    9,808,893
    
    
    
    5.48
    
    
    
    5,275,755
    
    
    
    (0.55
    )Mortgage-backed securities(2)
    
    
    9,041,368
    
    
    
    3.58
    
    
    
    6,262,548
    
    
    
    3.48
    
    
    
    2,778,819
    
    
    
    0.10Other investment securities(2)
    
    
    1,472,757
    
    
    
    3.88
    
    
    
    859,256
    
    
    
    4.05
    
    
    
    613,501
    
    
    
    (0.17
    )Money market and other
investments
    
    
    354,634
    
    
    
    2.58
    
    
    
    235,637
    
    
    
    1.23
    
    
    
    118,997
    
    
    
    1.35Total interest-earning assets
    
    
    25,953,407
    
    
    
    4.37
    %
    
    
    17,166,334
    
    
    
    4.62
    %
    
    
    8,787,072
    
    
    
    (0.25
    )%Noninterest-earning assets(3)(4)
    
    
    3,143,618
    
    
    
    
    
    
    
    2,181,754
    
    
    
    
    
    
    
    961,864Total assets
    
    $
    29,097,025
    
    
    
    
    
    
    $
    19,348,088
    
    
    
    
    
    
    $
    9,748,936Interest-bearing liabilities:DepositsSavings deposits
    
    $
    2,554,837
    
    
    
    0.29
    %
    
    $
    1,242,052
    
    
    
    0.17
    %
    
    $
    1,312,785
    
    
    
    0.12
    %Checking accounts
    
    
    2,027,385
    
    
    
    0.13
    
    
    
    1,675,705
    
    
    
    0.25
    
    
    
    351,680
    
    
    
    (0.12
    )Money market deposits
    
    
    6,406,684
    
    
    
    0.58
    
    
    
    4,725,441
    
    
    
    0.68
    
    
    
    1,681,243
    
    
    
    (0.10
    )Certificates of deposit
    
    
    4,355,235
    
    
    
    0.88
    
    
    
    4,007,431
    
    
    
    1.10
    
    
    
    347,804
    
    
    
    (0.22
    )Total interest-bearing deposits
    
    
    15,344,141
    
    
    
    0.56
    
    
    
    11,650,629
    
    
    
    0.71
    
    
    
    3,693,512
    
    
    
    (0.15
    )BorrowingsFHLB advances
    
    
    3,286,646
    
    
    
    1.41
    %
    
    
    1,073,018
    
    
    
    2.43
    %
    
    
    2,213,628
    
    
    
    (1.02
    )%Repurchase agreements
    
    
    3,272,284
    
    
    
    0.93
    
    
    
    1,524,186
    
    
    
    1.60
    
    
    
    1,748,098
    
    
    
    (0.67
    )Senior notes
    
    
    296,837
    
    
    
    6.89
    
    
    
    308,661
    
    
    
    7.14
    
    
    
    (11,824
    )
    
    
    (0.25
    )Other borrowings
    
    
    127,317
    
    
    
    4.37
    
    
    
    85,733
    
    
    
    7.19
    
    
    
    41,584
    
    
    
    (2.82
    )Total borrowings
    
    
    6,983,084
    
    
    
    1.47
    
    
    
    2,991,598
    
    
    
    2.63
    
    
    
    3,991,486
    
    
    
    (1.16
    )Total interest-bearing liabilities
    
    
    22,327,225
    
    
    
    0.84
    %
    
    
    14,642,227
    
    
    
    1.10
    %
    
    
    7,684,998
    
    
    
    (0.26
    )%Noninterest-bearing deposits
    
    
    2,542,134
    
    
    
    
    
    
    
    1,728,853
    
    
    
    
    
    
    
    813,281Other noninterest-bearing liabilities
    
    
    388,565
    
    
    
    
    
    
    
    277,838
    
    
    
    
    
    
    
    110,727Total liabilities
    
    
    25,257,924
    
    
    
    
    
    
    
    16,648,918
    
    
    
    
    
    
    
    8,609,006Stockholders equity(3)
    
    
    3,839,101
    
    
    
    
    
    
    
    2,699,170
    
    
    
    
    
    
    
    1,139,931Total liabilities and
stockholders equity
    
    $
    29,097,025
    
    
    
    
    
    
    $
    19,348,088
    
    
    
    
    
    
    $
    9,748,937Net interest rate spread
    
    
    
    
    
    
    3.53
    %
    
    
    
    
    
    
    3.52
    %
    
    
    
    
    
    
    0.01
    %Net interst rate margin
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    3.68
    %
    
    
    
    
    
    
    (0.03
    )%
  46




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##### Table of Contents



Six months ended June 30,
    
    
    Increase2011
    
    
    2010
    
    
    (decrease)Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Averageoutstanding
    
    
    
    
    
    
    outstanding
    
    
    
    
    
    
    outstandingbalance
    
    
    Yield/rate
    
    
    balance
    
    
    Yield/rate
    
    
    balance
    
    
    Yield/rateInterest-earning assets:Loans and leases(1)Commercial:Real estate
    
    $
    5,122,388
    
    
    
    5.48
    %
    
    $
    3,642,202
    
    
    
    5.82
    %
    
    $
    1,480,186
    
    
    
    (0.34
    )%Business
    
    
    2,869,424
    
    
    
    4.39
    
    
    
    1,896,341
    
    
    
    4.92
    
    
    
    973,083
    
    
    
    (0.53
    )Total commercial lending
    
    
    7,991,812
    
    
    
    5.09
    
    
    
    5,538,543
    
    
    
    5.51
    
    
    
    2,453,269
    
    
    
    (0.42
    )Residential real estate
    
    
    2,781,506
    
    
    
    4.70
    
    
    
    1,773,786
    
    
    
    5.20
    
    
    
    1,007,720
    
    
    
    (0.50
    )Home equity
    
    
    1,777,078
    
    
    
    4.56
    
    
    
    1,041,198
    
    
    
    4.84
    
    
    
    735,880
    
    
    
    (0.28
    )Other consumer
    
    
    269,536
    
    
    
    6.99
    
    
    
    224,316
    
    
    
    7.39
    
    
    
    45,220
    
    
    
    (0.40
    )Total loans
    
    
    12,819,932
    
    
    
    5.02
    
    
    
    8,577,843
    
    
    
    5.42
    
    
    
    4,242,089
    
    
    
    (0.40
    )Mortgage-backed securities(2)
    
    
    8,103,505
    
    
    
    3.68
    
    
    
    5,486,961
    
    
    
    3.53
    
    
    
    2,616,544
    
    
    
    0.15Other investment securities(2)
    
    
    1,212,218
    
    
    
    3.90
    
    
    
    805,159
    
    
    
    3.69
    
    
    
    407,059
    
    
    
    0.21Money market and other
investments
    
    
    292,594
    
    
    
    3.15
    
    
    
    161,729
    
    
    
    1.80
    
    
    
    130,865
    
    
    
    1.35Total interest-earning assets
    
    
    22,428,249
    
    
    
    4.47
    %
    
    
    15,031,692
    
    
    
    4.60
    %
    
    
    7,396,557
    
    
    
    (0.13
    )%Noninterest-earning assets(3)(4)
    
    
    2,702,054
    
    
    
    
    
    
    
    1,927,907
    
    
    
    
    
    
    
    774,147Total assets
    
    $
    25,130,303
    
    
    
    
    
    
    $
    16,959,599
    
    
    
    
    
    
    $
    8,170,704Interest-bearing liabilities:DepositsSavings deposits
    
    $
    1,907,423
    
    
    
    0.23
    %
    
    $
    1,080,622
    
    
    
    0.16
    %
    
    $
    826,801
    
    
    
    0.07
    %Checking accounts
    
    
    1,850,995
    
    
    
    0.12
    
    
    
    1,356,953
    
    
    
    0.21
    
    
    
    494,042
    
    
    
    (0.09
    )Money market deposits
    
    
    5,713,454
    
    
    
    0.54
    
    
    
    4,210,230
    
    
    
    0.69
    
    
    
    1,503,224
    
    
    
    (0.15
    )Certificates of deposit
    
    
    3,807,430
    
    
    
    0.98
    
    
    
    3,418,887
    
    
    
    1.09
    
    
    
    388,543
    
    
    
    (0.11
    )Total interest-bearing deposits
    
    
    13,279,302
    
    
    
    0.56
    
    
    
    10,066,692
    
    
    
    0.71
    
    
    
    3,212,610
    
    
    
    (0.15
    )BorrowingsFHLB advances
    
    
    2,403,895
    
    
    
    1.55
    
    
    
    858,141
    
    
    
    2.92
    
    
    
    1,545,754
    
    
    
    (1.37
    )Repurchase agreements
    
    
    3,167,927
    
    
    
    0.94
    
    
    
    1,434,744
    
    
    
    1.45
    
    
    
    1,733,183
    
    
    
    (0.51
    )Senior notes
    
    
    296,811
    
    
    
    6.97
    
    
    
    251,163
    
    
    
    8.59
    
    
    
    45,648
    
    
    
    (1.62
    )Other borrowings
    
    
    118,924
    
    
    
    4.22
    
    
    
    70,526
    
    
    
    6.33
    
    
    
    48,398
    
    
    
    (2.11
    )Total borrowings
    
    
    5,987,557
    
    
    
    1.55
    
    
    
    2,614,574
    
    
    
    2.74
    
    
    
    3,372,983
    
    
    
    (1.19
    )Total interest-bearing liabilities
    
    
    19,266,859
    
    
    
    0.87
    %
    
    
    12,681,266
    
    
    
    1.12
    %
    
    
    6,585,593
    
    
    
    (0.25
    )%Noninterest-bearing deposits
    
    
    2,217,179
    
    
    
    
    
    
    
    1,488,544
    
    
    
    
    
    
    
    728,635Other noninterest-bearing liabilities
    
    
    335,148
    
    
    
    
    
    
    
    238,566
    
    
    
    
    
    
    
    96,582Total liabilities
    
    
    21,819,186
    
    
    
    
    
    
    
    14,408,376
    
    
    
    
    
    
    
    7,410,810Stockholders equity(3)
    
    
    3,311,117
    
    
    
    
    
    
    
    2,551,223
    
    
    
    
    
    
    
    759,894Total liabilities and
stockholders equity
    
    $
    25,130,303
    
    
    
    
    
    
    $
    16,959,599
    
    
    
    
    
    
    $
    8,170,704Net interest rate spread
    
    
    
    
    
    
    3.60
    %
    
    
    
    
    
    
    3.48
    %
    
    
    
    
    
    
    0.12
    %Net interst rate margin
    
    
    
    
    
    
    3.72
    %
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    0.07
    %
  47




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##### Table of Contents



Three months ended June 30,
    
    
    Three months ended March 31,
    
    
    Increase2011
    
    
    2011
    
    
    (decrease)Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Averageoutstanding
    
    
    
    
    
    
    outstanding
    
    
    
    
    
    
    outstandingbalance
    
    
    Yield/rate
    
    
    balance
    
    
    Yield/rate
    
    
    balance
    
    
    Yield/rateInterest-earning assets:Loans and leases(1)Commercial:Real estate
    
    $
    5,807,141
    
    
    
    5.42
    %
    
    $
    4,430,619
    
    
    
    5.56
    %
    
    $
    1,376,522
    
    
    
    (0.14
    )%Business
    
    
    3,119,841
    
    
    
    4.30
    
    
    
    2,615,778
    
    
    
    4.43
    
    
    
    504,063
    
    
    
    (0.13
    )Total commercial lending
    
    
    8,926,982
    
    
    
    5.03
    
    
    
    7,046,397
    
    
    
    5.14
    
    
    
    1,880,585
    
    
    
    (0.11
    )Residential real estate
    
    
    3,848,440
    
    
    
    4.56
    
    
    
    1,738,384
    
    
    
    4.96
    
    
    
    2,110,056
    
    
    
    (0.40
    )Home equity
    
    
    2,038,870
    
    
    
    4.58
    
    
    
    1,508,189
    
    
    
    4.52
    
    
    
    530,681
    
    
    
    0.06Other consumer
    
    
    270,356
    
    
    
    7.10
    
    
    
    272,894
    
    
    
    6.59
    
    
    
    (2,538
    )
    
    
    0.51Total loans
    
    
    15,084,648
    
    
    
    4.93
    
    
    
    10,565,864
    
    
    
    5.12
    
    
    
    4,518,784
    
    
    
    (0.19
    )Mortgage-backed securities(2)
    
    
    9,041,368
    
    
    
    3.58
    
    
    
    7,155,225
    
    
    
    3.81
    
    
    
    1,886,143
    
    
    
    (0.23
    )Other investment securities(2)
    
    
    1,472,757
    
    
    
    3.88
    
    
    
    948,783
    
    
    
    3.95
    
    
    
    523,974
    
    
    
    (0.07
    )Money market and other
investments
    
    
    354,634
    
    
    
    2.58
    
    
    
    193,430
    
    
    
    4.15
    
    
    
    161,204
    
    
    
    (1.57
    )Total interest-earning assets
    
    
    25,953,407
    
    
    
    4.37
    %
    
    
    18,863,302
    
    
    
    4.58
    %
    
    
    7,090,105
    
    
    
    (0.21
    )%Noninterest-earning assets(3)(4)
    
    
    3,143,618
    
    
    
    
    
    
    
    2,256,204
    
    
    
    
    
    
    
    887,414Total assets
    
    $
    29,097,025
    
    
    
    
    
    
    $
    21,119,506
    
    
    
    
    
    
    $
    7,977,519Interest-bearing liabilities:DepositsSavings deposits
    
    $
    2,554,837
    
    
    
    0.29
    %
    
    $
    1,243,856
    
    
    
    0.10
    %
    
    $
    1,310,981
    
    
    
    0.19
    %Checking accounts
    
    
    2,027,385
    
    
    
    0.13
    
    
    
    1,732,971
    
    
    
    0.11
    
    
    
    294,414
    
    
    
    0.02Money market deposits
    
    
    6,406,684
    
    
    
    0.58
    
    
    
    5,012,521
    
    
    
    0.48
    
    
    
    1,394,163
    
    
    
    0.10Certificates of deposit
    
    
    4,355,235
    
    
    
    0.88
    
    
    
    3,253,538
    
    
    
    1.11
    
    
    
    1,101,697
    
    
    
    (0.23
    )Total interest-bearing deposits
    
    
    15,344,141
    
    
    
    0.56
    
    
    
    11,242,886
    
    
    
    0.56
    
    
    
    4,101,255
    
    
    
    BorrowingsFHLB advances
    
    
    3,286,646
    
    
    
    1.41
    
    
    
    1,437,270
    
    
    
    1.96
    
    
    
    1,849,376
    
    
    
    (0.55
    )Repurchase agreements
    
    
    3,272,284
    
    
    
    0.93
    
    
    
    3,136,477
    
    
    
    0.93
    
    
    
    135,807
    
    
    
    Senior notes
    
    
    296,837
    
    
    
    6.89
    
    
    
    296,783
    
    
    
    7.05
    
    
    
    54
    
    
    
    (0.16
    )Other borrowings
    
    
    127,317
    
    
    
    4.37
    
    
    
    92,557
    
    
    
    4.82
    
    
    
    34,760
    
    
    
    (0.45
    )Total borrowings
    
    
    6,983,084
    
    
    
    1.47
    
    
    
    4,963,087
    
    
    
    1.67
    
    
    
    2,019,997
    
    
    
    (0.20
    )Total interest-bearing liabilities
    
    
    22,327,225
    
    
    
    0.84
    %
    
    
    16,205,973
    
    
    
    0.90
    %
    
    
    6,121,252
    
    
    
    (0.06
    )%Noninterest-bearing deposits
    
    
    2,542,134
    
    
    
    
    
    
    
    1,837,248
    
    
    
    
    
    
    
    704,886Other noninterest-bearing liabilities
    
    
    388,565
    
    
    
    
    
    
    
    299,019
    
    
    
    
    
    
    
    89,546Total liabilities
    
    
    25,257,924
    
    
    
    
    
    
    
    18,342,240
    
    
    
    
    
    
    
    6,915,684Stockholders equity(3)
    
    
    3,839,101
    
    
    
    
    
    
    
    2,777,266
    
    
    
    
    
    
    
    1,061,835Total liabilities and
stockholders equity
    
    $
    29,097,025
    
    
    
    
    
    
    $
    21,119,506
    
    
    
    
    
    
    $
    7,977,519Net interest rate spread
    
    
    
    
    
    
    3.53
    %
    
    
    
    
    
    
    3.68
    %
    
    
    
    
    
    
    (0.15
    )%Net interst rate margin
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    3.80
    %
    
    
    
    
    
    
    (0.15
    )%
 (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 loan losses and bank owned life
insurance, earnings from which are reflected in noninterest income.  48




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##### Table of Contents



Year
Over Year Changes
  Quarter
Over Quarter Changes
   
    
    The increase in our average balance of investment securities of $2.4 billion was
primariliy driven by our acquisition of NewAlliance in the second
quarter, which accounted for
$2.3 billion of the increase. The average yield on investment securities decreased from
3.83% in the first quarter of 2011 to 3.63%. This decrease was, in part, driven by the
overall decrease in interest rates in the second quarter of 2011 compared to the first
quarter of 2011. Additionally, the decrease in yield also resulted from the composition of
the securities acquired from NewAlliance, which, in comparison to our portfolio prior to
acquisition, had a lower weighted average yield due to shorter durations and a higher
proportion of securities backed by pools of adjustable rate mortgages.
    
    In addition to the growth in our loan portfolio due to the acquisition of NewAlliance,
our interest income continued to benefit from organic loan growth as well. Excluding the
impact of our acquisition of NewAlliance, our average commercial loan portfolio increased
by $293 million during the second quarter, or 17% on an annualized basis, as we continue to
focus on growing our commercial portfolio through capitalizing on opportunities in our
expanded footprint. The $293 million increase was comprised of $150 million in commercial
real estate loans and $143 million in our commercial business loans.
    
    Our average balance of residential real estate loans increased by $2.1 billion compared
to the first quarter of 2011 driven by the average balance of residential real estate loans
acquired from NewAlliance of $2.1 billion. The decrease in yield of 40 basis points was
driven by both the decrease in overall interest rates in the second quarter of 2011 and the
lower yield on the loans acquired from NewAlliance.
    
    Our total interest rate on deposits remained flat with the incorporation of the deposits
from our NewAlliance merger as rate decreases in certificates of deposits were offset by
rate increases on savings and money market accounts. We continue to focus on achieving a
more favorable deposit mix. Excluding the average balance of deposits acquired from
NewAlliance, our core deposits grew 22% on an annualized basis compared to the first
quarter of 2011. The growth was particularly focused in our money market accounts as they
increased 36%, on an annualized basis, excluding deposits acquired from NewAlliance.
Consistent with prior quarters, certificates of deposits decreased by 21% on an annual
basis as our pricing strategy has remained focused on allowing the runoff of our highest
paying certificates of deposit balances.
    
    Our average total borrowings increased $2.0 billion since the first quarter resulting
from the borrowings acquired in the NewAlliance merger as well as our continued use of
wholesale funding to replace the runoff of our certificates of deposit balance discussed
above. Our average rate on borrowings declined 20 basis points in the second quarter
compared to the first quarter. The decrease in rate resulted from maturities of long-term
borrowings at higher rates, which were replaced with borrowings at lower rates due to the
current interest rate environment.
 Provision for Credit Losses
    49




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##### Table of Contents



Noninterest Income
  June 30,
    
    
    March 31,
    
    
    June 30,2011
    
    
    2011
    
    
    2010Banking services
    
    $
    24,613
    
    
    $
    19,006
    
    
    $
    21,529Insurance commissions
    
    
    17,044
    
    
    
    15,755
    
    
    
    12,768Wealth management services
    
    
    7,883
    
    
    
    6,734
    
    
    
    5,711Mortgage banking
    
    
    3,386
    
    
    
    1,263
    
    
    
    1,626Lending and leasing
    
    
    2,811
    
    
    
    3,763
    
    
    
    2,510Bank owned life insurance
    
    
    3,055
    
    
    
    2,030
    
    
    
    1,976Other
    
    
    2,103
    
    
    
    3,523
    
    
    
    (70
    )Total noninterest income
    
    $
    60,895
    
    
    $
    52,074
    
    
    $
    46,050Noninterest income as a percentage of net revenue
    
    
    20.9
    %
    
    
    23.1
    %
    
    
    22.9
    %
    2011
    
    
    2010Banking services
    
    $
    43,619
    
    
    $
    37,536Insurance commissions
    
    
    32,799
    
    
    
    24,931Wealth management services
    
    
    14,617
    
    
    
    8,959Mortgage banking
    
    
    4,649
    
    
    
    2,858Lending and leasing
    
    
    6,574
    
    
    
    4,554Bank owned life insurance
    
    
    5,085
    
    
    
    3,200Other
    
    
    5,626
    
    
    
    960Total noninterest income
    
    $
    112,969
    
    
    $
    82,998Noninterest income as a percentage of net revenue
    
    
    21.9
    %
    
    
    23.6
    %
   50




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##### Table of Contents



Noninterest Expense
  June 30,
    
    
    March 31,
    
    
    June 30,2011
    
    
    2011
    
    
    2010Salaries and benefits
    
    $
    90,192
    
    
    $
    73,776
    
    
    $
    64,081Occupancy and equipment
    
    
    18,952
    
    
    
    16,197
    
    
    
    13,422Technology and communications
    
    
    13,929
    
    
    
    12,871
    
    
    
    11,403Marketing and advertising
    
    
    3,880
    
    
    
    2,692
    
    
    
    7,691Professional services
    
    
    9,138
    
    
    
    6,039
    
    
    
    4,054Amortization of intangibles
    
    
    6,573
    
    
    
    5,489
    
    
    
    5,311FDIC premiums
    
    
    6,267
    
    
    
    6,195
    
    
    
    4,959Merger and acquisition integration expenses
    
    
    76,828
    
    
    
    6,176
    
    
    
    35,837Restructuring charges
    
    
    11,656
    
    
    
    1,056
    
    
    
    Other
    
    
    17,726
    
    
    
    14,659
    
    
    
    11,445Total noninterest expense
    
    
    255,141
    
    
    
    145,150
    
    
    
    158,203Less nonoperating expenses:Merger and acquisition integration expenses
    
    
    (76,828
    )
    
    
    (6,176
    )
    
    
    (35,837
    )Restructuring charges
    
    
    (11,656
    )
    
    
    (1,056
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    (754)Total
operating noninterest expense(2)
    
    $
    166,657
    
    
    $
    137,918
    
    
    $
    121,612Efficiency
ratio(1)
    
    
    87.6
    %
    
    
    64.5
    %
    
    
    78.8
    %Operating
efficiency ratio(2)
    
    
    57.2
    %
    
    
    61.3
    %
    
    
    60.6
    %
 (1)
    
    We believe this non-GAAP measure provides a meaningful comparison of our
underlying operational performance and facilitates investors assessments of business and
performance trends in comparison to others in the financial services industry. The efficiency
ratio is computed by dividing  noninterest expenses by the sum of net interest income
and noninterest income.(2)
    
    We believe this non-GAAP measure provides a meaningful comparison of our
underlying operational performance and facilitates investors assessments of business and
performance trends in comparison to others in the financial services industry. The operating
 efficiency ratio is computed by dividing operating noninterest
expenses by the sum of net interest income and noninterest income.     51




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##### Table of Contents



2011
    
    
    2010Salaries and benefits
    
    $
    163,968
    
    
    $
    112,318Occupancy and equipment
    
    
    35,149
    
    
    
    23,329Technology and communications
    
    
    26,800
    
    
    
    20,052Marketing and advertising
    
    
    6,572
    
    
    
    9,223Professional services
    
    
    15,177
    
    
    
    6,564Amortization of intangibles
    
    
    12,062
    
    
    
    8,558FDIC premiums
    
    
    12,462
    
    
    
    8,422Merger and
acquisition integration expenses
    
    
    83,004
    
    
    
    42,069Restructuring charges
    
    
    12,712
    
    
    
    Other
    
    
    32,385
    
    
    
    20,850Total noninterest expense
    
    
    400,291
    
    
    
    251,385Less nonoperating expenses:Merger and acquisition integration expenses
    
    
    (83,004
    )
    
    
    (42,069
    )Restructuring charges
    
    
    (12,712
    )
    
    
    Other
    
    
    
    
    
    
    (754
    )Total
operating noninterest expense(2)
    
    $
    304,575
    
    
    $
    208,562Efficiency ratio(1)
    
    
    77.5
    %
    
    
    71.4
    %Operating
efficiency
ratio(2)
    
    
    59.0
    %
    
    
    59.3
    %
 (1)
    
    We believe this non-GAAP measure provides a meaningful comparison of our underlying
operational performance and facilitates investors assessments of business and performance
trends in comparison to others in the financial services industry. The efficiency ratio is
computed by dividing  noninterest expenses by the sum of net interest income and
noninterest income.(2)
    
    We believe this non-GAAP measure provides a meaningful comparison of our underlying
operational performance and facilitates investors assessments of business and performance
trends in comparison to others in the financial services industry. The operating
 efficiency ratio is computed by dividing operating noninterest
expenses by the sum of net interest income and noninterest income.     52




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##### Table of Contents



Income Tax Expense
  ANALYSIS OF FINANCIAL CONDITION AT JUNE 30, 2011
 Overview
  Quarter ending June 30, 2011
    
    
    
    
    
    
    Period overBalances
    
    
    
    
    
    
    
    
    
    
    period changeacquired from
    
    
    Excluding
    
    
    Quarter ending
    
    
    excludingConsolidated
    
    

New Alliance
    
    

NewAlliance
    
    
    March 31, 2011
    
    

NewAllianceInvestment securities
    
    $
    11,160
    
    
    
    2,759
    
    
    
    8,401
    
    
    
    8,455
    
    
    
    (54
    )Loans and leases:Commercial:Real estate
    
    
    6,130
    
    
    
    1,469
    
    
    
    4,661
    
    
    
    4,542
    
    
    
    119Business
    
    
    3,335
    
    
    
    433
    
    
    
    2,902
    
    
    
    2,697
    
    
    
    205Total commercial loans
    
    
    9,465
    
    
    
    1,902
    
    
    
    7,563
    
    
    
    7,239
    
    
    
    324Residential real estate
    
    
    4,271
    
    
    
    2,569
    
    
    
    1,702
    
    
    
    1,702
    
    
    
    Home equity
    
    
    2,161
    
    
    
    632
    
    
    
    1,529
    
    
    
    1,507
    
    
    
    22Other consumer
    
    
    272
    
    
    
    10
    
    
    
    262
    
    
    
    263
    
    
    
    (1
    )Total loans and leases
    
    
    16,169
    
    
    
    5,113
    
    
    
    11,056
    
    
    
    10,711
    
    
    
    345Deposits:Savings accounts
    
    
    2,768
    
    
    
    1,543
    
    
    
    1,225
    
    
    
    1,271
    
    
    
    (46
    )Interest-bearing checking
    
    
    2,029
    
    
    
    421
    
    
    
    1,608
    
    
    
    1,726
    
    
    
    (118
    )Money market deposits
    
    
    6,878
    
    
    
    1,132
    
    
    
    5,746
    
    
    
    5,177
    
    
    
    569Noninterest-bearing deposits
    
    
    2,739
    
    
    
    694
    
    
    
    2,045
    
    
    
    2,050
    
    
    
    (5
    )Certificates of deposit
    
    
    4,487
    
    
    
    1,522
    
    
    
    2,965
    
    
    
    3,231
    
    
    
    (266
    )Total deposits
    
    
    18,901
    
    
    
    5,312
    
    
    
    13,589
    
    
    
    13,455
    
    
    
    134Short-term borrowings
    
    
    1,467
    
    
    
    478
    
    
    
    989
    
    
    
    970
    
    
    
    19Long-term borrowings
    
    
    6,134
    
    
    
    1,821
    
    
    
    4,313
    
    
    
    3,934
    
    
    
    379Total borrowings
    
    
    7,601
    
    
    
    2,299
    
    
    
    5,302
    
    
    
    4,904
    
    
    
    398
  
    
    Our ending loan balances at
June 30, 2011 increased $345 million, or 13% annualized, to $11.1 billion from $10.7
billion at March 31, 2011. The increase represents organic growth driven by our focus on
our commercial lending efforts as seen in the $324 million increase in total commercial
loans, or 18% on an annualized basis.
    
    The growth in deposits from NewAlliance was complemented by an increase of $569 million
in money market deposits in our upstate New York, Eastern Pennsylvania and Western
Pennsylvania markets. Our certificates of deposit decreased $266 million, reflecting our
strategy not to renew maturing certificates.
    
    In addition to our assumption of $2.3 billion in borrowings from the NewAlliance
acquisition, total borrowings increased by $398 million as we continued to increase our use
of wholesale funding.
  53




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##### Table of Contents



Lending Activities
   June 30, 2011
    
    
    December 31, 2010Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCommercial:Real estate
    
    $
    5,665,992
    
    
    
    35.0
    %
    
    $
    3,964,106
    
    
    
    37.8
    %Construction
    
    
    464,309
    
    
    
    2.9
    
    
    
    406,751
    
    
    
    3.9Business
    
    
    3,335,330
    
    
    
    20.6
    
    
    
    2,623,079
    
    
    
    25.0Total commercial
    
    
    9,465,631
    
    
    
    58.5
    
    
    
    6,993,936
    
    
    
    66.7Residential real estate
    
    
    4,270,811
    
    
    
    26.4
    
    
    
    1,692,198
    
    
    
    16.1Home equity
    
    
    2,160,665
    
    
    
    13.4
    
    
    
    1,524,570
    
    
    
    14.6Other consumer
    
    
    272,118
    
    
    
    1.7
    
    
    
    272,710
    
    
    
    2.6Total loans and leases
    
    
    16,169,225
    
    
    
    100.0
    %
    
    
    10,483,414
    
    
    
    100.0
    %Allowance for loan losses
    
    
    (107,028
    )
    
    
    
    
    
    
    (95,354
    )Total loans and leases, net
    
    $
    16,062,197
    
    
    
    
    
    
    $
    10,388,060
   54




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##### Table of Contents



Upstate New
    
    
    Western
    
    
    Eastern
    
    
    
    
    
    
    Total loans andYork
    
    
    Pennsylvania
    
    
    Pennsylvania
    
    
    New England
    
    
    leasesJune 30, 2011:Commercial:Real estate
    
    $
    2,830,800
    
    
    $
    466,550
    
    
    $
    1,024,780
    
    
    $
    1,343,862
    
    
    $
    5,665,992Construction
    
    
    288,688
    
    
    
    29,151
    
    
    
    27,043
    
    
    
    119,427
    
    
    
    464,309Business
    
    
    1,598,026
    
    
    
    885,176
    
    
    
    398,020
    
    
    
    454,108
    
    
    
    3,335,330Total commercial
    
    
    4,717,514
    
    
    
    1,380,877
    
    
    
    1,449,843
    
    
    
    1,917,397
    
    
    
    9,465,631Residential real estate
    
    
    1,353,825
    
    
    
    53,224
    
    
    
    265,319
    
    
    
    2,598,443
    
    
    
    4,270,811Home equity
    
    
    763,721
    
    
    
    141,867
    
    
    
    614,421
    
    
    
    640,656
    
    
    
    2,160,665Other consumer
    
    
    157,500
    
    
    
    56,352
    
    
    
    47,380
    
    
    
    10,886
    
    
    
    272,118Total loans and leases
    
    $
    6,992,560
    
    
    $
    1,632,320
    
    
    $
    2,376,963
    
    
    $
    5,167,382
    
    
    $
    16,169,225December 31, 2010:Commercial:Real estate
    
    $
    2,610,001
    
    
    $
    388,227
    
    
    $
    965,878
    
    
    $
    
    
    
    $
    3,964,106Construction
    
    
    363,828
    
    
    
    20,521
    
    
    
    22,402
    
    
    
    
    
    
    
    406,751Business
    
    
    1,484,970
    
    
    
    754,451
    
    
    
    383,658
    
    
    
    
    
    
    
    2,623,079Total commercial
    
    
    4,458,799
    
    
    
    1,163,199
    
    
    
    1,371,938
    
    
    
    
    
    
    
    6,993,936Residential real estate
    
    
    1,389,880
    
    
    
    36,249
    
    
    
    266,069
    
    
    
    
    
    
    
    1,692,198Home equity
    
    
    777,577
    
    
    
    107,345
    
    
    
    639,648
    
    
    
    
    
    
    
    1,524,570Other consumer
    
    
    160,376
    
    
    
    59,507
    
    
    
    52,827
    
    
    
    
    
    
    
    272,710Total loans and leases
    
    $
    6,786,632
    
    
    $
    1,366,300
    
    
    $
    2,330,482
    
    
    $
    
    
    
    $
    10,483,414
    Investment Securities Portfolio
    55




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##### Table of Contents



Deposits
  June 30, 2011
    
    
    December 31, 2010Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    IncreaseCore deposits:Savings
    
    $
    2,767,951
    
    
    
    14.7
    %
    
    $
    1,235,004
    
    
    
    9.4
    %
    
    $
    1,532,947Interest-bearing checking
    
    
    2,028,645
    
    
    
    10.7
    
    
    
    1,705,537
    
    
    
    13.0
    
    
    
    323,108Money market deposits
    
    
    6,878,214
    
    
    
    36.4
    
    
    
    4,919,014
    
    
    
    37.4
    
    
    
    1,959,200Noninterest-bearing
    
    
    2,738,917
    
    
    
    14.5
    
    
    
    1,989,505
    
    
    
    15.1
    
    
    
    749,412Total core deposits
    
    
    14,413,727
    
    
    
    76.3
    
    
    
    9,849,060
    
    
    
    74.9
    
    
    
    4,564,667Certificates
    
    
    4,486,768
    
    
    
    23.7
    
    
    
    3,299,784
    
    
    
    25.1
    
    
    
    1,186,984Total deposits
    
    $
    18,900,495
    
    
    
    100.0
    %
    
    $
    13,148,844
    
    
    
    100.0
    %
    
    $
    5,751,651
  56




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##### Table of Contents



Upstate New
    
    
    Western
    
    
    EasternYork
    
    
    Pennsylvania
    
    
    Pennsylvania
    
    
    New England
    
    
    Total depositsJune 30, 2011Core deposits:Savings
    
    $
    880,833
    
    
    $
    135,858
    
    
    $
    255,550
    
    
    $
    1,495,710
    
    
    $
    2,767,951Interest-bearing checking
    
    
    625,528
    
    
    
    484,651
    
    
    
    506,406
    
    
    
    412,060
    
    
    
    2,028,645Money market deposits
    
    
    3,405,425
    
    
    
    1,142,435
    
    
    
    1,087,471
    
    
    
    1,242,883
    
    
    
    6,878,214Noninterest-bearing
    
    
    1,076,298
    
    
    
    563,808
    
    
    
    433,776
    
    
    
    665,035
    
    
    
    2,738,917Total core deposits
    
    
    5,988,084
    
    
    
    2,326,752
    
    
    
    2,283,203
    
    
    
    3,815,688
    
    
    
    14,413,727Certificates
    
    
    1,219,735
    
    
    
    969,235
    
    
    
    859,616
    
    
    
    1,438,182
    
    
    
    4,486,768Total deposits
    
    $
    7,207,819
    
    
    $
    3,295,987
    
    
    $
    3,142,819
    
    
    $
    5,253,870
    
    
    $
    18,900,495December 31, 2010Core deposits:Savings
    
    $
    846,859
    
    
    $
    130,361
    
    
    $
    257,784
    
    
    $
    
    
    
    $
    1,235,004Interest-bearing checking
    
    
    617,845
    
    
    
    502,345
    
    
    
    585,347
    
    
    
    
    
    
    
    1,705,537Money market deposits
    
    
    3,107,727
    
    
    
    961,233
    
    
    
    850,054
    
    
    
    
    
    
    
    4,919,014Noninterest-bearing
    
    
    1,012,715
    
    
    
    526,673
    
    
    
    450,117
    
    
    
    
    
    
    
    1,989,505Total core deposits
    
    
    5,585,146
    
    
    
    2,120,612
    
    
    
    2,143,302
    
    
    
    
    
    
    
    9,849,060Certificates
    
    
    1,234,347
    
    
    
    1,011,659
    
    
    
    1,053,778
    
    
    
    
    
    
    
    3,299,784Total deposits
    
    $
    6,819,493
    
    
    $
    3,132,271
    
    
    $
    3,197,080
    
    
    $
    
    
    
    $
    13,148,844
  Borrowings
  Capital
     57




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##### Table of Contents



Minimum amount to be well-Actual
    
    
    capitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    RatioFirst Niagara Financial Group, Inc.:Leverage ratio
    
    $
    2,118,084
    
    
    
    7.81
    %
    
    
    N/A
    
    
    
    N/ATier 1 risk-based capital
    
    
    2,118,084
    
    
    
    12.05
    
    
    $
    1,054,648
    
    
    
    6.00
    %Total risk-based capital
    
    
    2,230,916
    
    
    
    12.69
    
    
    
    1,758,011
    
    
    
    10.00First Niagara Bank, N.A.:Leverage ratio
    
    $
    2,054,174
    
    
    
    7.58
    %
    
    $
    1,354,996
    
    
    
    5.00
    %Tier 1 risk-based capital
    
    
    2,054,174
    
    
    
    11.72
    
    
    
    1,051,625
    
    
    
    6.00Total risk-based capital
    
    
    2,167,006
    
    
    
    12.37
    
    
    
    1,751,824
    
    
    
    10.00
    RISK MANAGEMENT
 Credit Risk
 Allowance for Loan Losses and Nonperforming Assets
       58




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##### Table of Contents



59




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##### Table of Contents



Legacy
    
    
    AcquiredCommercial
    
    
    Consumer
    
    
    Commercial
    
    
    Consumer
    
    
    Total2011Allowance for loan losses:Balance at beginning of period
    
    $
    89,001
    
    
    $
    6,353
    
    
    $
    
    
    
    $
    
    
    
    $
    95,354Provision
for loan losses
    
    
    22,644
    
    
    
    3,813
    
    
    
    882
    
    
    
    
    
    
    
    27,339Charge-offs
    
    
    (15,165
    )
    
    
    (4,072
    )
    
    
    (882
    )
    
    
    
    
    
    
    (20,119
    )Recoveries
    
    
    3,424
    
    
    
    1,030
    
    
    
    
    
    
    
    
    
    
    
    4,454Balance at end of period
    
    $
    99,904
    
    
    $
    7,124
    
    
    $
    
    
    
    $
    
    
    
    $
    107,028Allowance for loan losses:Individually evaluated for impairment
    
    $
    4,794
    
    
    $
    1,716
    
    
    $
    
    
    
    $
    
    
    
    $
    6,510Collectively evaluated for impairment
    
    
    95,110
    
    
    
    5,408
    
    
    
    
    
    
    
    
    
    
    
    100,518Total
    
    $
    99,904
    
    
    $
    7,124
    
    
    $
    
    
    
    $
    
    
    
    $
    107,028Loans receivable:Balance at end of periodIndividually evaluated for impairment
    
    $
    62,412
    
    
    $
    12,459
    
    
    $
    
    
    
    $
    
    
    
    $
    74,871Collectively evaluated for impairment
    
    
    6,015,626
    
    
    
    2,769,198
    
    
    
    
    
    
    
    
    
    
    
    8,784,824Loans acquired with deteriorated
credit quality(1)
    
    
    
    
    
    
    
    
    
    
    3,387,593
    
    
    
    3,921,937
    
    
    
    7,309,530Total
    
    $
    6,078,038
    
    
    $
    2,781,657
    
    
    $
    3,387,593
    
    
    $
    3,921,937
    
    
    $
    16,169,2252010Allowance for loan losses:Balance at beginning of period
    
    $
    82,813
    
    
    $
    5,490
    
    
    $
    
    
    
    $
    
    
    
    $
    88,303Provision
for loan losses
    
    
    21,483
    
    
    
    2,648
    
    
    
    
    
    
    
    
    
    
    
    24,131Charge-offs
    
    
    (22,008
    )
    
    
    (1,924
    )
    
    
    
    
    
    
    
    
    
    
    (23,932
    )Recoveries
    
    
    1,091
    
    
    
    816
    
    
    
    
    
    
    
    
    
    
    
    1,907Balance at end of period
    
    $
    83,379
    
    
    $
    7,030
    
    
    $
    
    
    
    $
    
    
    
    $
    90,409Allowance for loan losses:Individually evaluated for impairment
    
    $
    9,272
    
    
    $
    29
    
    
    $
    
    
    
    $
    
    
    
    $
    9,301Collectively evaluated for impairment
    
    
    74,107
    
    
    
    7,001
    
    
    
    
    
    
    
    
    
    
    
    81,108Total
    
    $
    83,379
    
    
    $
    7,030
    
    
    $
    
    
    
    $
    
    
    
    $
    90,409Loans receivable:Balance at end of periodIndividually evaluated for impairment
    
    $
    48,986
    
    
    $
    10,127
    
    
    $
    
    
    
    $
    
    
    
    $
    59,113Collectively evaluated for impairment
    
    
    4,458,631
    
    
    
    2,436,848
    
    
    
    
    
    
    
    
    
    
    
    6,895,479Loans acquired with deteriorated
credit quality(1)
    
    
    
    
    
    
    
    
    
    
    1,897,673
    
    
    
    1,112,255
    
    
    
    3,009,928Total
    
    $
    4,507,617
    
    
    $
    2,446,975
    
    
    $
    1,897,673
    
    
    $
    1,112,255
    
    
    $
    9,964,520
 (1)
    
    Includes all loans acquired subsequent to January 1, 2009.  60




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Legacy
    
    
    AcquiredCommercial
    
    
    Consumer
    
    
    Commercial
    
    
    Consumer
    
    
    Total2011Allowance for loan losses:Balance at beginning of period
    
    $
    92,945
    
    
    $
    7,181
    
    
    $
    
    
    
    $
    
    
    
    $
    100,126Provision
for loan losses
    
    
    12,377
    
    
    
    1,254
    
    
    
    808
    
    
    
    
    
    
    
    14,439Charge-offs
    
    
    (7,454
    )
    
    
    (1,874
    )
    
    
    (808
    )
    
    
    
    
    
    
    (10,136
    )Recoveries
    
    
    2,036
    
    
    
    563
    
    
    
    
    
    
    
    
    
    
    
    2,599Balance at
end of period
    
    $
    99,904
    
    
    $
    7,124
    
    
    $
    
    
    
    $
    
    
    
    $
    107,0282010Allowance for loan losses:Balance at beginning of period
    
    $
    83,873
    
    
    $
    5,615
    
    
    $
    
    
    
    $
    
    
    
    $
    89,488Provision
for loan losses
    
    
    9,013
    
    
    
    1,987
    
    
    
    
    
    
    
    
    
    
    
    11,000Charge-offs
    
    
    (10,242
    )
    
    
    (1,016
    )
    
    
    
    
    
    
    
    
    
    
    (11,258
    )Recoveries
    
    
    735
    
    
    
    444
    
    
    
    
    
    
    
    
    
    
    
    1,179Balance at
end of period
    
    $
    83,379
    
    
    $
    7,030
    
    
    $
    
    
    
    $
    
    
    
    $
    90,409
   2011
    
    
    2010Net
    
    
    Percent of
    
    
    Net
    
    
    Percent ofcharge-offs
    
    
    average loans
    
    
    charge-offs
    
    
    average loansCommercial:Real estate
    
    $
    4,793
    
    
    
    0.17
    %
    
    $
    13,124
    
    
    
    0.73
    %Business
    
    
    7,830
    
    
    
    0.51
    %
    
    
    7,793
    
    
    
    0.83
    %Total commercial
    
    
    12,623
    
    
    
    0.29
    %
    
    
    20,917
    
    
    
    0.76
    %Residential real estate
    
    
    839
    
    
    
    0.04
    %
    
    
    220
    
    
    
    0.03
    %Home equity
    
    
    1,610
    
    
    
    0.16
    %
    
    
    520
    
    
    
    0.10
    %Other consumer
    
    
    593
    
    
    
    0.44
    %
    
    
    368
    
    
    
    0.33
    %$
    15,665
    
    
    
    0.21
    %
    
    $
    22,025
    
    
    
    0.52
    %
  61




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##### Table of Contents



June 30,
    
    
    December 31,2011
    
    
    2010Nonaccruing loans:Commercial:Commercial real estate:Acquisition and development
    
    $
    780
    
    
    $
    1,870Multifamily
    
    
    6,218
    
    
    
    3,075Investment real estate
    
    
    19,537
    
    
    
    24,536Owner occupied
    
    
    16,346
    
    
    
    14,584Total commercial real estate
    
    
    42,881
    
    
    
    44,065Business
    
    
    20,021
    
    
    
    25,819Total commercial
    
    
    62,902
    
    
    
    69,884Consumer:Residential real estate
    
    
    14,484
    
    
    
    14,461Home equity
    
    
    4,748
    
    
    
    4,605Other consumer
    
    
    379
    
    
    
    373Total consumer
    
    
    19,611
    
    
    
    19,439Total
    
    
    82,513
    
    
    
    89,323Real estate owned
    
    
    12,315
    
    
    
    8,647Total nonperforming assets (1)
    
    $
    94,828
    
    
    $
    97,970Loans 90 days past due and still accruing interest(2)
    
    $
    134,869
    
    
    $
    58,097Total nonperforming assets as a percentage of total assets
    
    
    0.31
    %
    
    
    0.46
    %Total nonaccruing loans as a percentage of total loans
    
    
    0.51
    %
    
    
    0.85
    %Allowance for loan losses to nonaccruing loans
    
    
    129.7
    %
    
    
    106.8
    %
 (1)
    
    Nonperforming assets do not include $19 million and $22 million of performing
renegotiated loans that are accruing interest at June 30, 2011 and December 31, 2010,
respectively.(2)
    
    All such loans represent acquired loans that were originally recorded at fair
value upon acquisition. These loans are considered to be accruing as we can reasonably
estimate future cash flows on these acquired loans and we expect to fully collect the
carrying value of these loans. Therefore, we are accreting the difference between the
carrying value of these loans and their expected cash flows.  62




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##### Table of Contents



30-59 days
    
    
    60-89 days
    
    
    Greater than 90
    
    
    Total
    
    
    
    
    
    
    Total loans
    
    
    Greater than 90June 30, 2011
    
    past due
    
    
    past due
    
    
    days past due
    
    
    past due
    
    
    Current
    
    
    receivable
    
    
    days and accruingLegacy loansCommercial:Commercial real estate:Acquisition and development
    
    $
    
    
    
    $
    
    
    
    $
    636
    
    
    $
    636
    
    
    $
    101,033
    
    
    $
    101,669
    
    
    $
    Multifamily
    
    
    1,216
    
    
    
    
    
    
    
    335
    
    
    
    1,551
    
    
    
    1,074,847
    
    
    
    1,076,398
    
    
    
    Investment real estate
    
    
    1,121
    
    
    
    
    
    
    
    13,357
    
    
    
    14,478
    
    
    
    1,528,215
    
    
    
    1,542,693
    
    
    
    Owner occupied
    
    
    2,807
    
    
    
    84
    
    
    
    10,586
    
    
    
    13,477
    
    
    
    941,220
    
    
    
    954,697
    
    
    
    Total commercial real estate
    
    
    5,144
    
    
    
    84
    
    
    
    24,914
    
    
    
    30,142
    
    
    
    3,645,315
    
    
    
    3,675,457
    
    
    
    Business
    
    
    3,394
    
    
    
    2,698
    
    
    
    5,681
    
    
    $
    11,773
    
    
    
    2,390,808
    
    
    
    2,402,581
    
    
    
    Total commercial
    
    
    8,538
    
    
    
    2,782
    
    
    
    30,595
    
    
    
    41,915
    
    
    
    6,036,123
    
    
    
    6,078,038
    
    
    
    Consumer:Residential real estate
    
    
    11,176
    
    
    
    2,205
    
    
    
    12,527
    
    
    $
    25,908
    
    
    
    1,588,488
    
    
    
    1,614,396
    
    
    
    Home equity
    
    
    2,368
    
    
    
    2,061
    
    
    
    4,478
    
    
    
    8,907
    
    
    
    1,005,511
    
    
    
    1,014,418
    
    
    
    Other consumer
    
    
    1,139
    
    
    
    504
    
    
    
    346
    
    
    
    1,989
    
    
    
    150,854
    
    
    
    152,843
    
    
    
    Total consumer
    
    
    14,683
    
    
    
    4,770
    
    
    
    17,351
    
    
    
    36,804
    
    
    
    2,744,853
    
    
    
    2,781,657
    
    
    
    Total
    
    $
    23,221
    
    
    $
    7,552
    
    
    $
    47,946
    
    
    $
    78,719
    
    
    $
    8,780,976
    
    
    $
    8,859,695
    
    
    $
    Acquired loansCommercial:Commercial real estate:Acquisition and development
    
    $
    18
    
    
    $
    
    
    
    $
    1,573
    
    
    $
    1,591
    
    
    $
    14,423
    
    
    $
    16,014
    
    
    $
    1,573Multifamily
    
    
    
    
    
    
    301
    
    
    
    857
    
    
    
    1,158
    
    
    
    234,061
    
    
    
    235,219
    
    
    
    857Investment real estate
    
    
    5,894
    
    
    
    
    
    
    
    27,959
    
    
    
    33,853
    
    
    
    1,051,816
    
    
    
    1,085,669
    
    
    
    27,959Owner occupied
    
    
    4,849
    
    
    
    5,230
    
    
    
    17,278
    
    
    
    27,357
    
    
    
    1,090,585
    
    
    
    1,117,942
    
    
    
    17,278Total commercial real
estate
    
    
    10,761
    
    
    
    5,531
    
    
    
    47,667
    
    
    
    63,959
    
    
    
    2,390,885
    
    
    
    2,454,844
    
    
    
    47,667Business
    
    
    5,587
    
    
    
    623
    
    
    
    10,863
    
    
    $
    17,073
    
    
    
    915,676
    
    
    
    932,749
    
    
    
    10,863Total commercial
    
    
    16,348
    
    
    
    6,154
    
    
    
    58,530
    
    
    
    81,032
    
    
    
    3,306,561
    
    
    
    3,387,593
    
    
    
    58,530Consumer:Residential real estate
    
    
    17,129
    
    
    
    14,835
    
    
    
    58,605
    
    
    $
    90,569
    
    
    
    2,565,846
    
    
    
    2,656,415
    
    
    
    58,605Home equity
    
    
    8,639
    
    
    
    5,061
    
    
    
    15,965
    
    
    
    29,665
    
    
    
    1,116,582
    
    
    
    1,146,247
    
    
    
    15,965Other consumer
    
    
    1,955
    
    
    
    1,189
    
    
    
    1,769
    
    
    
    4,913
    
    
    
    114,362
    
    
    
    119,275
    
    
    
    1,769Total consumer
    
    
    27,723
    
    
    
    21,085
    
    
    
    76,339
    
    
    
    125,147
    
    
    
    3,796,790
    
    
    
    3,921,937
    
    
    
    76,339Total
    
    $
    44,071
    
    
    $
    27,239
    
    
    $
    134,869
    
    
    $
    206,179
    
    
    $
    7,103,351
    
    
    $
    7,309,530
    
    
    $
    134,869
  63




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##### Table of Contents



30-59 days
    
    
    60-89 days
    
    
    Greater than 90
    
    
    Total
    
    
    
    
    
    
    Total loans
    
    
    Greater than 90December 31, 2010
    
    past due
    
    
    past due
    
    
    days past due
    
    
    past due
    
    
    Current
    
    
    receivable
    
    
    days and accruingLegacy loansCommercial:Commercial real estate:Acquisition and development
    
    $
    
    
    
    $
    
    
    
    $
    1,722
    
    
    $
    1,722
    
    
    $
    112,102
    
    
    $
    113,824
    
    
    $
    Multifamily
    
    
    
    
    
    
    
    
    
    
    601
    
    
    
    601
    
    
    
    948,519
    
    
    
    949,120
    
    
    
    Investment real estate
    
    
    954
    
    
    
    750
    
    
    
    17,891
    
    
    
    19,595
    
    
    
    1,521,444
    
    
    
    1,541,039
    
    
    
    Owner occupied
    
    
    347
    
    
    
    604
    
    
    
    9,477
    
    
    
    10,428
    
    
    
    749,393
    
    
    
    759,821
    
    
    
    Total commercial real
estate
    
    
    1,301
    
    
    
    1,354
    
    
    
    29,691
    
    
    
    32,346
    
    
    
    3,331,458
    
    
    
    3,363,804
    
    
    
    Business
    
    
    2,126
    
    
    
    1,027
    
    
    
    7,634
    
    
    
    10,787
    
    
    
    1,960,582
    
    
    
    1,971,369
    
    
    
    Total commercial
    
    
    3,427
    
    
    
    2,381
    
    
    
    37,325
    
    
    
    43,133
    
    
    
    5,292,040
    
    
    
    5,335,173
    
    
    
    Consumer:Residential real estate
    
    
    5,228
    
    
    
    3,571
    
    
    
    14,138
    
    
    
    22,937
    
    
    
    1,404,136
    
    
    
    1,427,073
    
    
    
    Home equity
    
    
    2,450
    
    
    
    1,328
    
    
    
    4,551
    
    
    
    8,329
    
    
    
    915,388
    
    
    
    923,717
    
    
    
    Other consumer
    
    
    1,262
    
    
    
    413
    
    
    
    301
    
    
    
    1,976
    
    
    
    145,756
    
    
    
    147,732
    
    
    
    Total consumer
    
    
    8,940
    
    
    
    5,312
    
    
    
    18,990
    
    
    
    33,242
    
    
    
    2,465,280
    
    
    
    2,498,522
    
    
    
    Total
    
    $
    12,367
    
    
    $
    7,693
    
    
    $
    56,315
    
    
    $
    76,375
    
    
    $
    7,757,320
    
    
    $
    7,833,695
    
    
    $
    Acquired loansCommercial:Commercial real estate:Acquisition and development
    
    $
    3,840
    
    
    $
    1,355
    
    
    $
    1,355
    
    
    $
    6,550
    
    
    $
    14,797
    
    
    $
    21,347
    
    
    $
    1,355Multifamily
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    190
    
    
    
    133,291
    
    
    
    133,481
    
    
    
    190Investment real estate
    
    
    1,554
    
    
    
    422
    
    
    
    23,770
    
    
    
    25,746
    
    
    
    295,349
    
    
    
    321,095
    
    
    
    23,770Owner occupied
    
    
    1,481
    
    
    
    497
    
    
    
    7,344
    
    
    
    9,322
    
    
    
    521,808
    
    
    
    531,130
    
    
    
    7,344Total commercial real
estate
    
    
    6,875
    
    
    
    2,274
    
    
    
    32,659
    
    
    
    41,808
    
    
    
    965,245
    
    
    
    1,007,053
    
    
    
    32,659Business
    
    
    1,423
    
    
    
    1,299
    
    
    
    6,354
    
    
    
    9,076
    
    
    
    642,634
    
    
    
    651,710
    
    
    
    6,354Total commercial
    
    
    8,298
    
    
    
    3,573
    
    
    
    39,013
    
    
    
    50,884
    
    
    
    1,607,879
    
    
    
    1,658,763
    
    
    
    39,013Consumer:Residential real estate
    
    
    2,321
    
    
    
    2,200
    
    
    
    5,514
    
    
    
    10,035
    
    
    
    255,090
    
    
    
    265,125
    
    
    
    5,514Home equity
    
    
    7,158
    
    
    
    2,741
    
    
    
    12,168
    
    
    
    22,067
    
    
    
    578,786
    
    
    
    600,853
    
    
    
    12,168Other consumer
    
    
    2,617
    
    
    
    750
    
    
    
    1,402
    
    
    
    4,769
    
    
    
    120,209
    
    
    
    124,978
    
    
    
    1,402Total consumer
    
    
    12,096
    
    
    
    5,691
    
    
    
    19,084
    
    
    
    36,871
    
    
    
    954,085
    
    
    
    990,956
    
    
    
    19,084Total
    
    $
    20,394
    
    
    $
    9,264
    
    
    $
    58,097
    
    
    $
    87,755
    
    
    $
    2,561,964
    
    
    $
    2,649,719
    
    
    $
    58,097
  64




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##### Table of Contents



Commercial real estateAcquisition and
    
    
    
    
    
    
    Investment real
    
    
    Owner
    
    
    
    
    
    
    
    
    
    
    Percent ofdevelopment
    
    
    Multifamily
    
    
    estate
    
    
    occupied
    
    
    Business
    
    
    Total
    
    
    TotalJune 30, 2011Legacy loans:Pass
    
    $
    24,680
    
    
    $
    1,044,473
    
    
    $
    1,349,620
    
    
    $
    857,731
    
    
    $
    2,153,652
    
    
    $
    5,430,156
    
    
    
    89.3
    %Criticized:(1)Accrual
    
    
    76,209
    
    
    
    25,707
    
    
    
    173,536
    
    
    
    80,620
    
    
    
    228,908
    
    
    
    584,980
    
    
    
    9.6
    %Nonaccrual
    
    
    780
    
    
    
    6,218
    
    
    
    19,537
    
    
    
    16,346
    
    
    
    20,021
    
    
    
    62,902
    
    
    
    1.1
    %Total criticized
    
    
    76,989
    
    
    
    31,925
    
    
    
    193,073
    
    
    
    96,966
    
    
    
    248,929
    
    
    
    647,882
    
    
    
    10.7
    %Total
    
    $
    101,669
    
    
    $
    1,076,398
    
    
    $
    1,542,693
    
    
    $
    954,697
    
    
    $
    2,402,581
    
    
    $
    6,078,038
    
    
    
    100.0
    %Acquired loans:Pass
    
    $
    1,786
    
    
    $
    199,681
    
    
    $
    973,230
    
    
    $
    938,996
    
    
    $
    791,139
    
    
    $
    2,904,832
    
    
    
    85.7
    %Criticized:(1)Accrual
    
    
    14,228
    
    
    
    35,538
    
    
    
    112,439
    
    
    
    178,946
    
    
    
    141,610
    
    
    
    482,761
    
    
    
    14.3
    %Nonaccrual(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total criticized
    
    
    14,228
    
    
    
    35,538
    
    
    
    112,439
    
    
    
    178,946
    
    
    
    141,610
    
    
    
    482,761
    
    
    
    14.3
    %Total
    
    $
    16,014
    
    
    $
    235,219
    
    
    $
    1,085,669
    
    
    $
    1,117,942
    
    
    $
    932,749
    
    
    $
    3,387,593
    
    
    
    100.0
    %December 31, 2010Legacy loans:Pass
    
    $
    31,533
    
    
    $
    918,441
    
    
    $
    1,358,263
    
    
    $
    680,764
    
    
    $
    1,753,412
    
    
    $
    4,742,413
    
    
    
    88.9
    %Criticized:(1)Accrual
    
    
    80,421
    
    
    
    27,604
    
    
    
    158,240
    
    
    
    64,473
    
    
    
    192,138
    
    
    
    522,876
    
    
    
    9.8
    %Nonaccrual
    
    
    1,870
    
    
    
    3,075
    
    
    
    24,536
    
    
    
    14,584
    
    
    
    25,819
    
    
    
    69,884
    
    
    
    1.3
    %Total criticized
    
    
    82,291
    
    
    
    30,679
    
    
    
    182,776
    
    
    
    79,057
    
    
    
    217,957
    
    
    
    592,760
    
    
    
    11.1
    %Total
    
    $
    113,824
    
    
    $
    949,120
    
    
    $
    1,541,039
    
    
    $
    759,821
    
    
    $
    1,971,369
    
    
    $
    5,335,173
    
    
    
    100.0
    %Acquired loans:Pass
    
    $
    691
    
    
    $
    131,155
    
    
    $
    235,973
    
    
    $
    443,856
    
    
    $
    546,433
    
    
    $
    1,358,108
    
    
    
    81.9
    %Criticized:(1)Accrual
    
    
    20,656
    
    
    
    2,326
    
    
    
    85,122
    
    
    
    87,274
    
    
    
    105,277
    
    
    
    300,655
    
    
    
    18.1
    %Nonaccrual(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total criticized
    
    
    20,656
    
    
    
    2,326
    
    
    
    85,122
    
    
    
    87,274
    
    
    
    105,277
    
    
    
    300,655
    
    
    
    18.1
    %Total
    
    $
    21,347
    
    
    $
    133,481
    
    
    $
    321,095
    
    
    $
    531,130
    
    
    $
    651,710
    
    
    $
    1,658,763
    
    
    
    100.0
    %
 (1)
    
    Includes special mention, substandard, doubtful, and loss, which are consistent
with regulatory definitions, and as described in Item 1, Business, under the heading
Classification of Assets in our Annual Report on 10-K for the year ended December 31, 2010.(2)
    
    Acquired loans were originally recorded at fair value upon acquisition. These loans
are considered to be accruing as we can reasonably estimate future cash flows on these
acquired loans and we expect to fully collect the carrying value of these loans. Therefore,
we are accreting the difference between the carrying value of these loans and their expected
cash flows.  65




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##### Table of Contents



Residential
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Percent ofreal estate
    
    
    Home equity
    
    
    consumer
    
    
    Total
    
    
    TotalJune 30, 2011Legacy loans by refreshed FICO score:Over 700
    
    $
    1,267,456
    
    
    $
    777,045
    
    
    $
    70,534
    
    
    $
    2,115,035
    
    
    
    76.1
    %660-700
    
    
    153,202
    
    
    
    126,575
    
    
    
    21,363
    
    
    
    301,140
    
    
    
    10.8
    %620-660
    
    
    76,468
    
    
    
    50,125
    
    
    
    12,435
    
    
    
    139,028
    
    
    
    5.0
    %580-620
    
    
    39,774
    
    
    
    21,240
    
    
    
    14,839
    
    
    
    75,853
    
    
    
    2.7
    %Less than 580
    
    
    63,594
    
    
    
    32,009
    
    
    
    10,581
    
    
    
    106,184
    
    
    
    3.8
    %No score
    
    
    13,902
    
    
    
    7,424
    
    
    
    23,091
    
    
    
    44,417
    
    
    
    1.6
    %Total
    
    $
    1,614,396
    
    
    $
    1,014,418
    
    
    $
    152,843
    
    
    $
    2,781,657
    
    
    
    100.0
    %Acquired loans by refreshed FICO score:Over 700
    
    $
    1,934,834
    
    
    $
    825,234
    
    
    $
    49,796
    
    
    $
    2,809,864
    
    
    
    71.7
    %660-700
    
    
    216,045
    
    
    
    133,020
    
    
    
    17,302
    
    
    
    366,367
    
    
    
    9.3
    %620-660
    
    
    86,579
    
    
    
    59,292
    
    
    
    10,065
    
    
    
    155,936
    
    
    
    4.0
    %580-620
    
    
    258,744
    
    
    
    6,845
    
    
    
    6,251
    
    
    
    271,840
    
    
    
    6.9
    %Less than 580
    
    
    116,606
    
    
    
    49,373
    
    
    
    9,125
    
    
    
    175,104
    
    
    
    4.5
    %No score
    
    
    43,607
    
    
    
    72,483
    
    
    
    26,736
    
    
    
    142,826
    
    
    
    3.6
    %Total
    
    $
    2,656,415
    
    
    $
    1,146,247
    
    
    $
    119,275
    
    
    $
    3,921,937
    
    
    
    100.0
    %December 31, 2010Legacy loans by refreshed FICO score:Over 700
    
    $
    1,092,172
    
    
    $
    705,211
    
    
    $
    72,524
    
    
    $
    1,869,907
    
    
    
    74.8
    %660-700
    
    
    138,265
    
    
    
    112,141
    
    
    
    21,017
    
    
    
    271,423
    
    
    
    10.9
    %620-660
    
    
    73,488
    
    
    
    45,887
    
    
    
    13,242
    
    
    
    132,617
    
    
    
    5.3
    %580-620
    
    
    40,409
    
    
    
    20,530
    
    
    
    7,673
    
    
    
    68,612
    
    
    
    2.7
    %Less than 580
    
    
    67,096
    
    
    
    32,867
    
    
    
    11,320
    
    
    
    111,283
    
    
    
    4.5
    %No score
    
    
    15,643
    
    
    
    7,081
    
    
    
    21,956
    
    
    
    44,680
    
    
    
    1.8
    %Total
    
    $
    1,427,073
    
    
    $
    923,717
    
    
    $
    147,732
    
    
    $
    2,498,522
    
    
    
    100.0
    %Acquired loans by refreshed FICO score:Over 700
    
    $
    139,706
    
    
    $
    400,341
    
    
    $
    54,765
    
    
    $
    594,812
    
    
    
    60.0
    %660-700
    
    
    29,981
    
    
    
    64,904
    
    
    
    18,076
    
    
    
    112,961
    
    
    
    11.4
    %620-660
    
    
    15,272
    
    
    
    34,267
    
    
    
    9,253
    
    
    
    58,792
    
    
    
    5.9
    %580-620
    
    
    17,482
    
    
    
    26,287
    
    
    
    5,516
    
    
    
    49,285
    
    
    
    5.0
    %Less than 580
    
    
    22,859
    
    
    
    46,528
    
    
    
    11,511
    
    
    
    80,898
    
    
    
    8.2
    %No score
    
    
    39,825
    
    
    
    28,526
    
    
    
    25,857
    
    
    
    94,208
    
    
    
    9.5
    %Total
    
    $
    265,125
    
    
    $
    600,853
    
    
    $
    124,978
    
    
    $
    990,956
    
    
    
    100.0
    %
   66




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##### Table of Contents



Residential Mortgage Banking
    June 30, 2011
    
    
    December 31, 201030 to 59 days past due
    
    
    0.72
    %
    
    
    0.66
    %60 to 89 days past due
    
    
    0.32
    %
    
    
    0.26
    %Greater than 90 days past due
    
    
    0.67
    %
    
    
    0.48
    %Total past due loans
    
    
    1.71
    %
    
    
    1.40
    %
 Investments
  Liquidity Risk
   
    
    Support our operating activities,
 
    
    Meet increases in demand for loans and other assets, and
 
    
    Provide for repayments of deposits and borrowings.
  67




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##### Table of Contents



Sources of liquidity
    Uses of liquidity
       68




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##### Table of Contents



Loan Maturity and Repricing Schedule
  One through fiveWithin one year
    
    
    years
    
    
    After five years
    
    
    TotalCommercial:Real estate
    
    $
    2,211,762
    
    
    $
    2,793,367
    
    
    $
    660,863
    
    
    $
    5,665,992Construction
    
    
    323,260
    
    
    
    100,180
    
    
    
    40,869
    
    
    
    464,309Business
    
    
    2,598,758
    
    
    
    660,968
    
    
    
    75,604
    
    
    
    3,335,330Total commercial
    
    
    5,133,780
    
    
    
    3,554,515
    
    
    
    777,336
    
    
    
    9,465,631Residential real estate
    
    
    764,958
    
    
    
    1,723,431
    
    
    
    1,782,422
    
    
    
    4,270,811Home equity
    
    
    1,248,643
    
    
    
    282,045
    
    
    
    629,977
    
    
    
    2,160,665Other consumer
    
    
    131,628
    
    
    
    76,402
    
    
    
    64,088
    
    
    
    272,118Total loans and leases
    
    $
    7,279,009
    
    
    $
    5,636,393
    
    
    $
    3,253,823
    
    
    $
    16,169,225
  Fixed
    
    
    Adjustable
    
    
    TotalCommercial:Real estate
    
    $
    1,845,590
    
    
    $
    1,608,640
    
    
    $
    3,454,230Construction
    
    
    108,055
    
    
    
    32,994
    
    
    
    141,049Business
    
    
    726,160
    
    
    
    10,412
    
    
    
    736,572Total commercial
    
    
    2,679,805
    
    
    
    1,652,046
    
    
    
    4,331,851Residential real estate
    
    
    1,780,383
    
    
    
    1,725,470
    
    
    
    3,505,853Home equity
    
    
    912,022
    
    
    
    
    
    
    
    912,022Other consumer
    
    
    140,490
    
    
    
    
    
    
    
    140,490Total loans and leases
    
    $
    5,512,700
    
    
    $
    3,377,516
    
    
    $
    8,890,216
  Interest Rate and Market Risk
      69




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##### Table of Contents



Calculated decreaseJune 30, 2011
    
    
    March 31, 2011Net interest
    
    
    
    
    
    
    Net interestChanges in interest rates(1)
    
    income
    
    
    % Change
    
    
    income
    
    
    % Change+200 basis points(2)
    
    $
    (2,960
    )
    
    
    (0.3
    )%
    
    $
    (8,172
    )
    
    
    (1.2
    )%+100 basis points
    
    
    (546
    )
    
    
    (0.1
    )
    
    
    (5,073
    )
    
    
    (0.7
    )
 (1)
    
    The Federal Reserve benchmark overnight federal funds rate
was 0.25% at both June 30,
2011 and March 31, 2011, therefore, the calculation of the effect of a decrease in interest rates is not
measurable.(2)
    
    Our Board of Directors has established a policy limiting the adverse change to net
interest income to less than 5% under this scenario. Impact of New Accounting Standards
     
 ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 ITEM 4.
    
    Controls and Procedures
    70




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1.
    
    Legal Proceedings
    
 ITEM 1A.
    
    Risk Factors
  
 ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 a)
    
    Not applicable. b)
    
    Not applicable. c)
    
    The following table discloses information regarding the repurchases of our common stock made
during the second quarter of 2011: Total number of shares
    
    
    Maximum number ofpurchased as part of
    
    
    shares yet to beNumber of shares
    
    
    Average price
    
    
    publicly announced
    
    
    purchased under theMonth
    
    purchased
    
    
    paid per share
    
    
    repurchase plans
    
    
    plansApril
    
    
    400,000
    
    
    $
    14.16
    
    
    
    400,000
    
    
    
    20,600,000May
    
    
    4,536,000
    
    
    
    14.10
    
    
    
    4,536,000
    
    
    
    16,064,000June
    
    
    3,730,000
    
    
    
    13.81
    
    
    
    3,730,000
    
    
    
    12,334,000Total
    
    
    8,666,000
    
    
    $
    13.98
  
 ITEM 3.
    
    Defaults Upon Senior Securities
  
 ITEM 5.
    
    Other Information
 (a)
    
    Not applicable. (b)
    
    Not applicable. 
 ITEM 6.
    
    Exhibits
  Exhibits31.1
    
    
    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
  71




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##### Table of Contents



SIGNATURES
  FIRST NIAGARA FINANCIAL GROUP, INC.Date:  August 8, 2011
    By:
    /s/ John R. KoelmelJohn R. KoelmelPresident and Chief Executive Officer
(Principal Executive Officer)Date:  August 8, 2011
    By:
    /s/ Gregory W. NorwoodGregory W. NorwoodChief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)  72