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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 000-23975
 
 FIRST NIAGARA FINANCIAL GROUP, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    42-1556195(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)726 Exchange Street, Suite 618, Buffalo, NY
(Address of Principal Executive Offices)
    
    14210
(Zip Code)
 (716) 819-5500
 Securities Registered Pursuant to Section 12(b) of the Act:
 Common Stock, par value $0.01 per share
    
    The NASDAQ Stock Market LLC(Title of Class)
    
    (Name of Exchange on which Registered)
 Securities Registered Pursuant to Section 12(g) of the Act:
None
 
 þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




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DOCUMENTS INCORPORATED
BY REFERENCE
  Document
    
    PartProxy Statement for
the 2010 Annual
Meeting of
Stockholders
    
    Part III, Item 10
Directors, Executive Officers and Corporate GovernancePart III, Item 11
Executive CompensationPart III, Item 12
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder MattersPart III, Item 13
Certain Relationships and Related Transactions, and Director IndependencePart III, Item 14
Principal Accountant Fees and Services
 2




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TABLE OF CONTENTS
 ITEM
    
    PAGENUMBER
    
    NUMBERPART I1 Business
    
    
    41A Risk Factors
    
    
    231B Unresolved Staff Comments
    
    
    282 Properties
    
    
    283 Legal Proceedings
    
    
    294 Submission of Matters to a Vote of Security Holders
    
    
    29PART II5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
    
    
    306 Selected Financial Data
    
    
    327 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    357A Quantitative and Qualitative Disclosures About Market Risk
    
    
    588 Financial Statements and Supplementary Data
    
    
    609 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    1079A Controls and Procedures
    
    
    1079B Other Information
    
    
    107PART III10 Directors, Executive Officers, and Corporate Governance
    
    
    10811 Executive Compensation
    
    
    10812 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    10813 Certain Relationships and Related Transactions, and Director Independence
    
    
    10814 Principal Accountant Fees and Services
    
    
    108PART IV15 Exhibits and Financial Statement Schedules
    
    
    109Signatures
    
    
    110Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32
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Unless the context otherwise requires, the terms we, us, and our refer to First
Niagara Financial Group, Inc. and its subsidiary on a consolidated basis.
 
 PART I
 
 ITEM 1. Business
 GENERAL
 First Niagara Financial Group, Inc.
     First Niagara Bank
    4




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OTHER INFORMATION
 www.fnfg.com
  FORWARD LOOKING STATEMENTS
   
    
    General economic conditions, either nationally or in our market areas, that are worse than
expected;
 
    
    Significantly increased competition among depository and other financial institutions;
 
    
    Inflation and changes in the interest rate environment that reduce our margins or fair
value of financial instruments;
 
    
    Changes in laws or government regulations affecting financial institutions, including
changes in regulatory fees and capital requirements;
 
    
    Our ability to enter new markets successfully and capitalize on growth opportunities;
 
    
    Our ability to successfully integrate acquired entities;
 
    
    Changes in consumer spending, borrowing, and savings habits;
 
    
    Changes in accounting policies and practices, as may be adopted by the bank regulatory
agencies, taxing authorities and the Financial Accounting Standards Board; and
 
    
    Changes in our organization, compensation, and benefit plans.
  MARKET AREAS AND COMPETITION
   5




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LENDING ACTIVITIES
  Commercial Real Estate and Multi-family Lending
      6




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Commercial Business Loans
    Specialized Lending
   Residential Real Estate Lending
    7




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Home Equity Lending
  Consumer Loans
     8




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Classification of Assets
    Allowance for Credit Losses
     9




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INVESTMENT ACTIVITIES
   WEALTH MANAGEMENT
   SOURCES OF FUNDS
  Deposits
  Borrowed Funds
   10




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FINANCIAL SERVICES
  Risk Management
   Employee Benefits Consulting
  SEGMENT INFORMATION
  SUPERVISION AND REGULATION
   11




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Federal Regulation of Our Savings Bank
 Business Activities
   Capital Requirements
    Prompt Corrective Action Regulations
  
    
    Well-capitalized (at least 5% leverage (core) capital,
6% Tier 1 risk-based capital and 10%
total risk-based capital);
 
    
    Adequately capitalized (at least 4% leverage
(core) capital, 4% Tier 1 risk-based capital
and 8% total risk-based capital);
  12




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
    
    Undercapitalized (less than 4% leverage (core) capital,
4% Tier 1 risk-based capital, or 8%
total risk-based capital);
 
    
    Significantly undercapitalized (less than 3% leverage
(core) capital, 3% Tier 1 risk-based
capital, or 6% total risk-based capital); or
 
    
    Critically undercapitalized (less than 2% tangible capital).
   Loans-to-One-Borrower
  Qualified Thrift Lender Test
   Capital Distributions
   13




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Community Reinvestment Act and Fair Lending Laws
  Transactions with Our Holding Company
  Loans to Insiders
  Standards for Safety and Soundness
   14




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Insurance of Deposit Accounts
       Prohibitions Against Tying Arrangements
  Federal Home Loan Bank System
   15




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Federal Reserve System
  Privacy Standards
   Holding Company Regulation
     Commercial Bank Regulation
   16




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Regulation as a Bank Holding Company With a National Bank Subsidiary
  Scope of Permitted Activities
   17




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Capital Requirements
  
    Dividend Restrictions
     18




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Source of Strength
  Provisions Applicable to Savings and Loan Holding Companies and Savings Associations That Do Not
Apply to Bank Holding Companies and National Banks
  Proposed Capital and Liquidity Requirements
   
    
    re-emphasize that common equity is the predominant component of Tier 1 capital by adding
a minimum common equity to risk-weighted assets ratio, with the ratio itself to be determined
based on the outcome of an impact study that the Basel Committee is conducting, and requiring
that goodwill, general intangibles and certain other items that currently must be deducted
from Tier 1 capital instead be deducted from common equity as a component of Tier 1 capital;
 
    
    disqualify innovative capital instruments, including trust preferred securities and other
instruments that effectively pay cumulative dividends, from Tier 1 capital status;
 
    
    strengthen the risk coverage of the capital framework, particularly with respect to
counterparty credit risk exposures arising from derivatives,
repurchase agreements and securities financing
activities;
 
    
    introduce a leverage ratio requirement as an international standard; and
 
    
    implement measures to promote the build up of capital buffers in good times that can be
drawn upon during periods of stress, introducing a countercyclical component designed to
address the concern that existing capital requirements are procyclical (that is, they
encourage reducing capital buffers in good times, when capital could more easily be raised,
and increasing capital buffers in times of distress, when access to capital markets may be
limited or they may effectively be closed).
    19




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Other Regulatory Considerations
 Cross Guarantee Provisions
  Compensation Practices
  Insolvency of an Insured Depository Institution
  
    
    to transfer any of the depository institutions assets and liabilities to a new obligor
without the approval of the depository institutions creditors;
 
    
    to enforce the terms of the depository institutions contracts pursuant to their terms; or
 
    
    to repudiate or disaffirm any contract or lease to which the depository institution is a
party, the performance of which is determined by the FDIC to be burdensome and the
disaffirmance or
repudiation of which is determined by the FDIC to promote the orderly administration of the
depository institution.
  20




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Other Legislation
 USA PATRIOT Act of 2001
  Sarbanes-Oxley Act
   The Fair and Accurate Credit Transactions (FACT) Act of 2003
  Troubled Assets Relief Program  Capital Purchase Program
   21




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TAXATION
  Method of Accounting
 st
 Corporate Dividends
  Net Operating Loss Carryovers
  Taxable Distributions and Recapture
  State of New York
   22




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Commonwealth of Pennsylvania
   Status of Audits by Taxing Authorities
  
 ITEM 1A. Risk Factors
  Economic Conditions May Adversely Affect Our Liquidity and Financial Condition
  
    
    A decrease in the demand for loans and other products and services offered by us;
 
    
    A decrease in the value of our loans held for sale or other assets secured by consumer or
commercial real estate;
 
    
    An impairment of certain intangible assets, such as goodwill;
and
 
    
    An increase in the number of clients and counterparties who become delinquent, file for
protection under bankruptcy laws or default on their loans or other obligations to us. An increase in the number of
delinquencies, bankruptcies or defaults could result in a higher level of nonperforming assets, net
charge-offs, provision for loan losses, and valuation adjustments on loans held for sale.
 Commercial Real Estate and Business Loans Increase Our Exposure to Credit Risks
   23




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Increases to the Allowance for Credit Losses May Cause Our Earnings to Decrease
    Concentration of Loans in Our Primary Market Area May Increase Risk
  Changes in Interest Rates Could Adversely Affect Our Results of Operations and Financial Condition
     24




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Our Ability to Grow May Be Limited if We Cannot Make Acquisitions
  Growing By Acquisition Entails Certain Risks
   Strong Competition May Limit Our Growth and Profitability
  We May Not Be Able to Attract and Retain Skilled People
  We Operate in a Highly Regulated Environment and May Be Adversely Affected by Changes in Laws and
Regulations
   25




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Proposed Legislative and Regulatory Reforms Could, if Enacted or Adopted, Result in Our Business
Becoming Subject to Significant and Extensive Additional Regulations and/or Could Adversely Affect
Our Results of Operations and Financial Condition
  
    
    tightening controls on the ability of banking institutions to engage in transactions with
affiliates;
 
    
    limiting the size and activities of financial institutions;
 
    
    amending regulatory capital standards, and increasing regulatory capital requirements, for
banks and other financial institutions and establishing new formulaic liquidity requirements
applicable to financial institutions, including those proposals described above under
Supervision and RegulationProposed Capital and Liquidity Requirements;
 
    
    establishing a new Financial Services Oversight Council chaired by the Treasury and a
Consumer Financial Protection Agency;
 
    
    establishing greater government powers to regulate risk across the financial system; and
 
    
    establishing heightened standards for and increased scrutiny of compensation policies at
financial institutions.
    Any Future FDIC Insurance Premiums May Adversely Affect our Earnings
  We Are a Holding Company and Depend on Our Subsidiaries for Dividends, Distributions and Other
Payments
   26




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We Hold Certain Intangible Assets that Could Be Classified as Impaired in The Future. If These
Assets Are Considered to Be Either Partially or Fully Impaired in the Future, the Book
Values of These Assets Would Decrease.
  We Are Subject to a Variety of Operational Risks, Including Reputational Risk, Legal and Compliance
Risk, the Risk of Fraud or Theft by Employees or Outsiders, Which May Adversely Affect Our Business
and Results of Operations
     27




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Our Information Systems May Experience an Interruption or Security Breach
  Anti-takeover Laws and Certain Agreements and Charter Provisions May Adversely Affect Share Value
  
 ITEM 1B. Unresolved Staff Comments
  
 ITEM 2. Properties
    28




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ITEM 3. Legal Proceedings
  Seibert v. Harleysville National Corp., et al.; McAuvic v. Geraghty, et al. Seibert McAuvic
 Seibert McAuvic
 Valerius, et al. v. Geraghty, et al. Shoemaker, et al. v. Geraghty, et al. Valerius Shoemaker Valerius
 Shoemaker Shoemaker
 Shoemaker Valerius Maffia
 
 ITEM 4. Submission of Matters to a Vote of Security Holders
   29




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PART II
 
 ITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
     30




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Stock Performance Graph
  FIRST NIAGARA FINANCIAL GROUP, INC.
 
 Period EndedIndex
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09First Niagara Financial Group, Inc.
    
    
    100.00
    
    
    
    106.62
    
    
    
    113.09
    
    
    
    95.34
    
    
    
    133.26
    
    
    
    119.62NASDAQ Composite
    
    
    100.00
    
    
    
    101.37
    
    
    
    111.03
    
    
    
    121.92
    
    
    
    72.49
    
    
    
    104.31SNL Mid Cap Bank & Thrift
    
    
    100.00
    
    
    
    95.34
    
    
    
    103.40
    
    
    
    81.99
    
    
    
    43.16
    
    
    
    36.87
  31




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ITEM 6. Selected Financial Data
 At or for the year ended December 31,
    
    2009(1)
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except per share amounts)Selected financial condition data:Total assets
    
    $
    14,584,833
    
    
    $
    9,331,372
    
    
    $
    8,096,228
    
    
    $
    7,945,526
    
    
    $
    8,064,832Loans and
leases, net(2)
    
    
    7,241,153
    
    
    
    6,385,982
    
    
    
    5,654,705
    
    
    
    5,593,512
    
    
    
    5,216,299Securities available for sale:Mortgage-backed
    
    
    3,650,058
    
    
    
    1,232,383
    
    
    
    817,614
    
    
    
    717,601
    
    
    
    867,037Other
    
    
    771,620
    
    
    
    340,718
    
    
    
    399,550
    
    
    
    342,821
    
    
    
    737,851Securities held to maturity:Mortgage-backed
    
    
    1,093,552
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deposits
    
    
    9,729,524
    
    
    
    5,943,613
    
    
    
    5,548,984
    
    
    
    5,709,736
    
    
    
    5,479,412Borrowings
    
    
    2,302,280
    
    
    
    1,540,227
    
    
    
    1,094,981
    
    
    
    747,554
    
    
    
    1,096,427Stockholders equity
    
    $
    2,373,661
    
    
    $
    1,727,263
    
    
    $
    1,353,179
    
    
    $
    1,387,197
    
    
    $
    1,374,423Common shares outstanding
    
    
    188,215
    
    
    
    118,562
    
    
    
    104,770
    
    
    
    110,719
    
    
    
    112,808Preferred shares outstanding
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    Selected operations data:Interest income
    
    $
    490,758
    
    
    $
    441,138
    
    
    $
    422,772
    
    
    $
    415,830
    
    
    $
    375,217Interest expense
    
    
    126,358
    
    
    
    172,561
    
    
    
    198,594
    
    
    
    169,349
    
    
    
    125,067Net interest income
    
    
    364,400
    
    
    
    268,577
    
    
    
    224,178
    
    
    
    246,481
    
    
    
    250,150Provision for credit losses
    
    
    43,650
    
    
    
    22,500
    
    
    
    8,500
    
    
    
    6,456
    
    
    
    7,348Net interest income after provision for credit losses
    
    
    320,750
    
    
    
    246,077
    
    
    
    215,678
    
    
    
    240,025
    
    
    
    242,802Noninterest income
    
    
    125,975
    
    
    
    115,735
    
    
    
    131,811
    
    
    
    111,218
    
    
    
    90,663Noninterest expense
    
    
    326,672
    
    
    
    228,410
    
    
    
    222,466
    
    
    
    211,851
    
    
    
    188,206Income before income taxes
    
    
    120,053
    
    
    
    133,402
    
    
    
    125,023
    
    
    
    139,392
    
    
    
    145,259Income taxes
    
    
    40,676
    
    
    
    44,964
    
    
    
    40,938
    
    
    
    47,533
    
    
    
    52,400Net income
    
    
    79,377
    
    
    
    88,438
    
    
    
    84,085
    
    
    
    91,859
    
    
    
    92,859Preferred stock dividend
    
    
    3,731
    
    
    
    1,022
    
    
    
    
    
    
    
    
    
    
    
    Accretion of preferred stock discount
    
    
    8,315
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    Net income available to common stockholders
    
    $
    67,331
    
    
    $
    87,254
    
    
    $
    84,085
    
    
    $
    91,859
    
    
    $
    92,859Stock and related per share data:Earnings per common share(1):Basic
    
    $
    0.46
    
    
    $
    0.81
    
    
    $
    0.82
    
    
    $
    0.86
    
    
    $
    0.85Diluted
    
    
    0.46
    
    
    
    0.81
    
    
    
    0.81
    
    
    
    0.85
    
    
    
    0.84Cash dividends
    
    
    0.56
    
    
    
    0.56
    
    
    
    0.54
    
    
    
    0.46
    
    
    
    0.38Book value
    
    
    12.84
    
    
    
    15.02
    
    
    
    13.41
    
    
    
    12.99
    
    
    
    12.65Market Price (NASDAQ: FNFG):High
    
    
    16.32
    
    
    
    22.38
    
    
    
    15.13
    
    
    
    15.43
    
    
    
    15.16Low
    
    
    9.48
    
    
    
    9.98
    
    
    
    11.15
    
    
    
    13.38
    
    
    
    12.05Close
    
    $
    13.91
    
    
    $
    16.17
    
    
    $
    12.04
    
    
    $
    14.86
    
    
    $
    14.47
 (1)
    
    Includes the impact of the acquisition of 57 NatCity branch locations on September
4, 2009.(2)
    
    Includes loans held for sale.  32




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At or for the year ended December 31,
    
    2009(1)
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollar amounts in thousands)Selected financial ratios and other data:Performance ratios(2):Return on average assets
    
    
    0.69
    %
    
    
    0.99
    %
    
    
    1.05
    %
    
    
    1.14
    %
    
    
    1.18
    %Common
equity:Return on average common equity
    
    
    3.47
    
    
    
    5.99
    
    
    
    6.24
    
    
    
    6.67
    
    
    
    6.76Return on average tangible common equity(3)
    
    
    6.06
    
    
    
    13.19
    
    
    
    14.12
    
    
    
    14.75
    
    
    
    14.41Total
equity:Return on average equity
    
    
    3.95
    
    
    
    5.99
    
    
    
    6.24
    
    
    
    6.67
    
    
    
    6.76Return on average tangible equity(4)
    
    
    6.71
    
    
    
    12.98
    
    
    
    14.12
    
    
    
    14.75
    
    
    
    14.41Net interest rate spread
    
    
    3.40
    
    
    
    3.19
    
    
    
    2.84
    
    
    
    3.20
    
    
    
    3.46Net interest rate margin
    
    
    3.65
    
    
    
    3.55
    
    
    
    3.33
    
    
    
    3.61
    
    
    
    3.75Efficiency ratio(5)
    
    
    66.62
    
    
    
    59.43
    
    
    
    62.49
    
    
    
    59.23
    
    
    
    55.22Dividend payout ratio
    
    
    121.74
    %
    
    
    69.14
    %
    
    
    65.85
    %
    
    
    53.49
    %
    
    
    44.71
    %Capital ratios:First Niagara Bank:Total risk-based capital
    
    
    13.73
    %
    
    
    12.72
    %
    
    
    11.35
    %
    
    
    12.16
    %
    
    
    12.26
    %Tier 1 risk-based capital
    
    
    12.63
    
    
    
    11.48
    
    
    
    10.10
    
    
    
    10.91
    
    
    
    11.01Tier 1 (core) capital
    
    
    7.48
    
    
    
    8.47
    
    
    
    7.54
    
    
    
    7.73
    
    
    
    7.56Tangible capital
    
    
    7.48
    
    
    
    8.47
    
    
    
    7.54
    
    
    
    7.73
    
    
    
    7.56Consolidated equity:Ratio of stockholders equity to total assets
    
    
    16.27
    
    
    
    18.51
    
    
    
    16.71
    
    
    
    17.46
    
    
    
    17.04Ratio of tangible common stockholders equity
to tangible assets(6)
    
    
    10.54
    %
    
    
    8.96
    %
    
    
    8.21
    %
    
    
    8.88
    %
    
    
    8.40
    %Asset quality:Total nonaccruing loans
    
    $
    68,561
    
    
    $
    46,417
    
    
    $
    28,054
    
    
    $
    15,528
    
    
    $
    21,930Other nonperforming assets
    
    
    7,057
    
    
    
    2,001
    
    
    
    237
    
    
    
    632
    
    
    
    843Allowance for credit losses
    
    
    88,303
    
    
    
    77,793
    
    
    
    70,247
    
    
    
    71,913
    
    
    
    72,340Net loan charge-offs
    
    $
    33,140
    
    
    $
    17,844
    
    
    $
    10,084
    
    
    $
    6,883
    
    
    $
    7,114Total nonaccruing loans to total loans
    
    
    0.94
    %
    
    
    0.72
    %
    
    
    0.49
    %
    
    
    0.27
    %
    
    
    0.41
    %Total nonperforming assets to total assets
    
    
    0.52
    
    
    
    0.52
    
    
    
    0.35
    
    
    
    0.20
    
    
    
    0.28Allowance for credit losses to nonaccruing loans
    
    
    128.8
    
    
    
    167.6
    
    
    
    250.4
    
    
    
    463.1
    
    
    
    329.9Allowance for credit losses to total loans
    
    
    1.20
    
    
    
    1.20
    
    
    
    1.23
    
    
    
    1.27
    
    
    
    1.37Net charge-offs to average loans
    
    
    0.50
    %
    
    
    0.28
    %
    
    
    0.18
    %
    
    
    0.12
    %
    
    
    0.14
    %Other data:Number of branches
    
    
    171
    
    
    
    114
    
    
    
    110
    
    
    
    119
    
    
    
    118Full time equivalent employees
    
    
    2,816
    
    
    
    1,909
    
    
    
    1,824
    
    
    
    1,922
    
    
    
    1,984
 (1)
    
    Includes the impact of the acquisition of 57 NatCity branch locations on
September 4, 2009.(2)
    
    Computed using daily averages.(3)
    
    Average tangible common equity excludes average goodwill, other intangibles, and
preferred stock of $899.5 million, $814.6 million, $752.5 million, $754.9 million, and
$729.8 million for 2009, 2008, 2007, 2006, and 2005, 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.(4)
    
    Average tangible equity excludes average goodwill and other intangibles of
$828.6 million, $794.9 million, $752.5 million, $754.9 million, and $729.8 million for
2009, 2008, 2007, 2006, and 2005, 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.(5)
    
    Computed by dividing noninterest expense by the sum of net interest income
and noninterest income.(6)
    
    Tangible common stockholders equity and tangible assets exclude goodwill and
other intangibles of $935.4 million, $784.5 million, $750.1 million, $748.1 million, and
$760.7 million for 2009, 2008, 2007, 2006, and 2005. This is a non-GAAP financial measure
that we believe provides investors with information that is useful in understanding our
financial performance and condition.  33




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##### Table of Contents



2009
    
    
    2008Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    Firstquarter
    
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarter
    
    
    quarter(In thousands, except per share amounts)Selected Quarterly Data:Interest income
    
    $
    145,357
    
    
    $
    128,788
    
    
    $
    110,794
    
    
    $
    105,819
    
    
    $
    109,798
    
    
    $
    109,951
    
    
    $
    111,402
    
    
    $
    109,987Interest expense
    
    
    32,454
    
    
    
    29,866
    
    
    
    30,849
    
    
    
    33,189
    
    
    
    38,092
    
    
    
    39,751
    
    
    
    44,793
    
    
    
    49,925Net Interest income
    
    
    112,903
    
    
    
    98,922
    
    
    
    79,945
    
    
    
    72,630
    
    
    
    71,706
    
    
    
    70,200
    
    
    
    66,609
    
    
    
    60,062Provision for credit losses
    
    
    11,000
    
    
    
    15,000
    
    
    
    8,900
    
    
    
    8,750
    
    
    
    8,000
    
    
    
    6,500
    
    
    
    4,900
    
    
    
    3,100Net interest income after provision for
credit losses
    
    
    101,903
    
    
    
    83,922
    
    
    
    71,045
    
    
    
    63,880
    
    
    
    63,706
    
    
    
    63,700
    
    
    
    61,709
    
    
    
    56,962Noninterest income
    
    
    35,517
    
    
    
    33,224
    (2)
    
    
    28,774
    
    
    
    28,460
    
    
    
    27,643
    
    
    
    29,189
    
    
    
    29,636
    
    
    
    29,267Noninterest expense
    
    
    94,720
    (1)
    
    
    100,720
    (3)
    
    
    68,085
    (4)
    
    
    63,147
    (5)
    
    
    57,555
    
    
    
    56,754
    
    
    
    56,594
    
    
    
    57,507
    (6)Income before Income taxes
    
    
    42,700
    
    
    
    16,426
    
    
    
    31,734
    
    
    
    29,193
    
    
    
    33,794
    
    
    
    36,135
    
    
    
    34,751
    
    
    
    28,722Income taxes
    
    
    13,796
    
    
    
    5,495
    
    
    
    10,934
    
    
    
    10,451
    
    
    
    10,988
    
    
    
    12,395
    
    
    
    11,672
    
    
    
    9,909Net income
    
    
    28,904
    
    
    
    10,931
    
    
    
    20,800
    
    
    
    18,742
    
    
    
    22,806
    
    
    
    23,740
    
    
    
    23,079
    
    
    
    18,813Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    1,431
    
    
    
    2,300
    
    
    
    1,022
    
    
    
    
    
    
    
    
    
    
    
    Accretion of preferred stock discount
    
    
    
    
    
    
    
    
    
    
    7,947
    
    
    
    368
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    Net income available to common stockholders
    
    $
    28,904
    
    
    $
    10,931
    
    
    $
    11,422
    
    
    $
    16,074
    
    
    $
    21,622
    
    
    $
    23,740
    
    
    $
    23,079
    
    
    $
    18,813Earnings per share:Basic
    
    $
    0.16
    
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.19
    
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.18Diluted
    
    
    0.16
    
    
    
    0.07
    
    
    
    0.08
    
    
    
    0.14
    
    
    
    0.19
    
    
    
    0.22
    
    
    
    0.22
    
    
    
    0.18Market price (NASDAQ: FNFG):High
    
    
    14.47
    
    
    
    14.06
    
    
    
    14.23
    
    
    
    16.32
    
    
    
    16.45
    
    
    
    22.38
    
    
    
    15.00
    
    
    
    14.15Low
    
    
    12.40
    
    
    
    10.73
    
    
    
    10.53
    
    
    
    9.48
    
    
    
    11.00
    
    
    
    11.68
    
    
    
    12.60
    
    
    
    9.98Close
    
    
    13.91
    
    
    
    12.33
    
    
    
    11.42
    
    
    
    10.89
    
    
    
    16.17
    
    
    
    15.75
    
    
    
    12.86
    
    
    
    13.59Cash dividends
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.14
 (1)
    
    Includes merger and acquisition integration costs of $4.0 million related to the
acquisition of 57 NatCity Bank branch locations and proposed merger with Harleysville National
Corporation.(2)
    
    Includes gain on sale of merchant services customer list of $2.5 million.(3)
    
    Includes merger and acquisition integration costs of $23.4 million related to the
acquisition of 57 NatCity branch locations and the proposed merger with Harleysville National
Corporation and a $5.0 million charitable contribution to the First Niagara Bank Foundation.(4)
    
    Includes FDIC special assessment of $5.4 million and merger and acquisition
integration costs of $2.3 million related to the acquisition of 57 NatCity Bank branch
locations and the proposed merger with Harleysville National Corporation.(5)
    
    Includes merger and acquisition integration costs of $1.7 million related to the
acquisition of 57 NatCity branch locations.(6)
    
    Includes real estate writedowns and integration costs of $2.0 million related to the
acquisition of Great Lakes Bancorp, Inc.  34




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##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  OVERVIEW
      FINANCIAL OVERVIEW
   35




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Investment Securities
   36




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##### Table of Contents



Acquired Loans
    Goodwill
     37




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##### Table of Contents



ANALYSIS OF FINANCIAL CONDITION
 Lending Activities
     38




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##### Table of Contents



Loan Portfolio Composition
  2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCommercial:Real estate
    
    $
    2,713,542
    
    
    
    37.2
    %
    
    $
    2,211,402
    
    
    
    34.4
    %
    
    $
    1,902,334
    
    
    
    33.5
    %
    
    $
    1,786,384
    
    
    
    31.7
    %
    
    $
    1,647,576
    
    
    
    31.3
    %Construction
    
    
    348,040
    
    
    
    4.8
    
    
    
    340,564
    
    
    
    5.3
    
    
    
    292,675
    
    
    
    5.1
    
    
    
    248,325
    
    
    
    4.4
    
    
    
    222,907
    
    
    
    4.2Business
    
    
    1,481,845
    
    
    
    20.3
    
    
    
    940,304
    
    
    
    14.6
    
    
    
    730,029
    
    
    
    12.8
    
    
    
    561,323
    
    
    
    10.0
    
    
    
    473,571
    
    
    
    9.0Specialized lending
    
    
    207,749
    
    
    
    2.8
    
    
    
    178,916
    
    
    
    2.8
    
    
    
    183,747
    
    
    
    3.2
    
    
    
    155,032
    
    
    
    2.7
    
    
    
    159,759
    
    
    
    3.0Total commercial
    
    
    4,751,176
    
    
    
    65.1
    
    
    
    3,671,186
    
    
    
    57.1
    
    
    
    3,108,785
    
    
    
    54.6
    
    
    
    2,751,064
    
    
    
    48.8
    
    
    
    2,503,813
    
    
    
    47.5Residential real estate
    
    
    1,674,961
    
    
    
    22.9
    
    
    
    1,990,784
    
    
    
    31.0
    
    
    
    1,955,690
    
    
    
    34.3
    
    
    
    2,252,473
    
    
    
    40.0
    
    
    
    2,182,907
    
    
    
    41.4Home equity
    
    
    691,069
    
    
    
    9.5
    
    
    
    624,495
    
    
    
    9.7
    
    
    
    503,779
    
    
    
    8.9
    
    
    
    470,714
    
    
    
    8.3
    
    
    
    403,340
    
    
    
    7.7Other consumer
    
    
    186,341
    
    
    
    2.5
    
    
    
    143,989
    
    
    
    2.2
    
    
    
    127,169
    
    
    
    2.2
    
    
    
    163,824
    
    
    
    2.9
    
    
    
    178,732
    
    
    
    3.4Total loans and leases
    
    
    7,303,547
    
    
    
    100.0
    %
    
    
    6,430,454
    
    
    
    100.0
    %
    
    
    5,695,423
    
    
    
    100.0
    %
    
    
    5,638,075
    
    
    
    100.0
    %
    
    
    5,268,792
    
    
    
    100.0
    %Net deferred costs and
unearned discounts
    
    
    25,909
    
    
    
    
    
    
    
    33,321
    
    
    
    
    
    
    
    29,529
    
    
    
    
    
    
    
    27,350
    
    
    
    
    
    
    
    19,847Allowance for credit losses
    
    
    (88,303
    )
    
    
    
    
    
    
    (77,793
    )
    
    
    
    
    
    
    (70,247
    )
    
    
    
    
    
    
    (71,913
    )
    
    
    
    
    
    
    (72,340
    )Total loans and leases, net
    
    $
    7,241,153
    
    
    
    
    
    
    $
    6,385,982
    
    
    
    
    
    
    $
    5,654,705
    
    
    
    
    
    
    $
    5,593,512
    
    
    
    
    
    
    $
    5,216,299
  Upstate New
    
    
    Western
    
    
    Total loans andYork
    
    
    Pennsylvania (1)
    
    
    leasesCommercial:Real estate
    
    $
    2,414,478
    
    
    $
    299,064
    
    
    $
    2,713,542Construction
    
    
    348,040
    
    
    
    
    
    
    
    348,040Business
    
    
    1,013,995
    
    
    
    467,850
    
    
    
    1,481,845Specialized lending
    
    
    207,749
    
    
    
    
    
    
    
    207,749Total commercial
    
    
    3,984,262
    
    
    
    766,914
    
    
    
    4,751,176Residential real estate
    
    
    1,655,627
    
    
    
    19,334
    
    
    
    1,674,961Home equity
    
    
    674,047
    
    
    
    17,022
    
    
    
    691,069Other consumer
    
    
    120,293
    
    
    
    66,048
    
    
    
    186,341Total loans and leases
    
    $
    6,434,229
    
    
    $
    869,318
    
    
    $
    7,303,547
 (1)
    
    Commercial loans in Western Pennsylvania include $34.9 million of performing
commercial real estate loans and $24.8 million of performing business loans purchased from
Harleysville in December 2009.  39




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##### Table of Contents



Allowance for Credit Losses and Nonperforming Assets
  2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Amount of
    
    
    
    
    
    
    Amount of
    
    
    
    
    
    
    Amount of
    
    
    
    
    
    
    Amount of
    
    
    
    
    
    
    Amount ofallowance
    
    
    Percent of
    
    
    allowance
    
    
    Percent of
    
    
    allowance
    
    
    Percent of
    
    
    allowance
    
    
    Percent of
    
    
    allowance
    
    
    Percent offor credit
    
    
    loans to
    
    
    for credit
    
    
    loans to
    
    
    for credit
    
    
    loans to
    
    
    for credit
    
    
    loans to
    
    
    for credit
    
    
    loans tolosses
    
    

toal loans
    
    
    losses
    
    

toal loans
    
    
    losses
    
    

toal loans
    
    
    losses
    
    

toal loans
    
    
    losses
    
    
    toal loansCommercial:Real estate and construction
    
    $
    44,497
    
    
    
    42.0
    %
    
    $
    32,789
    
    
    
    39.7
    %
    
    $
    24,886
    
    
    
    38.6
    %
    
    $
    25,434
    
    
    
    36.1
    %
    
    $
    26,751
    
    
    
    35.5
    %Business
    
    
    30,972
    
    
    
    20.3
    
    
    
    25,816
    
    
    
    14.6
    
    
    
    19,107
    
    
    
    12.8
    
    
    
    18,209
    
    
    
    10.0
    
    
    
    15,644
    
    
    
    9.0Specialized lending
    
    
    7,352
    
    
    
    2.8
    
    
    
    10,138
    
    
    
    2.8
    
    
    
    8,705
    
    
    
    3.2
    
    
    
    7,443
    
    
    
    2.7
    
    
    
    7,892
    
    
    
    3.0Total commercial
    
    
    82,821
    
    
    
    65.1
    
    
    
    68,743
    
    
    
    57.1
    
    
    
    52,698
    
    
    
    54.6
    
    
    
    51,086
    
    
    
    48.8
    
    
    
    50,287
    
    
    
    47.5Residential real estate
    
    
    1,825
    
    
    
    22.9
    
    
    
    1,663
    
    
    
    31.0
    
    
    
    3,384
    
    
    
    34.3
    
    
    
    3,898
    
    
    
    40.0
    
    
    
    4,036
    
    
    
    41.4Home equity
    
    
    1,216
    
    
    
    9.5
    
    
    
    775
    
    
    
    9.7
    
    
    
    1,344
    
    
    
    8.9
    
    
    
    1,278
    
    
    
    8.3
    
    
    
    1,667
    
    
    
    7.7Other consumer
    
    
    2,441
    
    
    
    2.5
    
    
    
    2,524
    
    
    
    2.2
    
    
    
    2,974
    
    
    
    2.2
    
    
    
    4,250
    
    
    
    2.9
    
    
    
    5,299
    
    
    
    3.4Unallocated
    
    
    
    
    
    
    
    
    
    
    4,088
    
    
    
    
    
    
    
    9,847
    
    
    
    
    
    
    
    11,401
    
    
    
    
    
    
    
    11,051
    
    
    
    Total
    
    $
    88,303
    
    
    
    100.0
    %
    
    $
    77,793
    
    
    
    100.0
    %
    
    $
    70,247
    
    
    
    100.0
    %
    
    $
    71,913
    
    
    
    100.0
    %
    
    $
    72,340
    
    
    
    100.0
    %Allowance for credit losses to
total loans
    
    
    1.20
    %
    
    
    
    
    
    
    1.20
    %
    
    
    
    
    
    
    1.23
    %
    
    
    
    
    
    
    1.27
    %
    
    
    
    
    
    
    1.37
    %
      40




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##### Table of Contents



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Nonaccruing loans(1):Commercial:Real estate
    
    $
    37,129
    
    
    $
    26,546
    
    
    $
    16,229
    
    
    $
    4,513
    
    
    $
    6,755Business
    
    
    4,759
    
    
    
    7,411
    
    
    
    3,430
    
    
    
    2,599
    
    
    
    3,171Specialized lending
    
    
    1,962
    
    
    
    4,354
    
    
    
    2,920
    
    
    
    1,751
    
    
    
    4,573Shared national credits
    
    
    11,403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    55,253
    
    
    
    38,311
    
    
    
    22,579
    
    
    
    8,863
    
    
    
    14,499Residential real estate
    
    
    9,468
    
    
    
    5,516
    
    
    
    3,741
    
    
    
    4,490
    
    
    
    5,911Home equity
    
    
    2,330
    
    
    
    2,076
    
    
    
    849
    
    
    
    819
    
    
    
    567Other consumer
    
    
    1,510
    
    
    
    514
    
    
    
    885
    
    
    
    1,356
    
    
    
    953Total nonaccruing loans
    
    
    68,561
    
    
    
    46,417
    
    
    
    28,054
    
    
    
    15,528
    
    
    
    21,930Real estate owned
    
    
    7,057
    
    
    
    2,001
    
    
    
    237
    
    
    
    632
    
    
    
    843Total nonperforming assets (2)
    
    $
    75,618
    
    
    $
    48,418
    
    
    $
    28,291
    
    
    $
    16,160
    
    
    $
    22,773Loans 90 days past due and still
accruing interest
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Total nonperforming assets as a
percentage of total assets
    
    
    0.52
    %
    
    
    0.52
    %
    
    
    0.35
    %
    
    
    0.20
    %
    
    
    0.28
    %Total nonaccruing loans as a
percentage of total loans
    
    
    0.94
    %
    
    
    0.72
    %
    
    
    0.49
    %
    
    
    0.27
    %
    
    
    0.41
    %Allowance for credit losses to nonaccruing loans
    
    
    128.8
    %
    
    
    167.6
    %
    
    
    250.4
    %
    
    
    463.1
    %
    
    
    329.9
    %
 (1)
    
    We place loans on nonaccrual status when they become 90 days past due or if we have
uncertainty about collecting all interest or principal.(2)
    
    Nonperforming assets do not include $29.3 million, $6.9 million, $6.1 million, $4.1
million, and $3.1 million of performing renegotiated loans that are accruing interest at
December 31, 2009, 2008, 2007, 2006, and 2005 respectively.  41




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##### Table of Contents



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Commercial:Real estate
    
    $
    9,679
    
    
    $
    5,295
    
    
    $
    4,729
    
    
    $
    1,285
    
    
    $
    421Business
    
    
    5,690
    
    
    
    7,460
    
    
    
    1,388
    
    
    
    141
    
    
    
    1,119Specialized lending
    
    
    6,588
    
    
    
    3,532
    
    
    
    2,123
    
    
    
    1,640
    
    
    
    2,260Shared national credits
    
    
    8,543
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    30,500
    
    
    
    16,287
    
    
    
    8,240
    
    
    
    3,066
    
    
    
    3,800Residential real estate
    
    
    157
    
    
    
    77
    
    
    
    219
    
    
    
    258
    
    
    
    131Home equity
    
    
    871
    
    
    
    187
    
    
    
    98
    
    
    
    32
    
    
    
    34Other consumer
    
    
    1,612
    
    
    
    1,293
    
    
    
    1,527
    
    
    
    3,527
    
    
    
    3,149$
    33,140
    
    
    $
    17,844
    
    
    $
    10,084
    
    
    $
    6,883
    
    
    $
    7,114
     Investing Activities
 Securities Portfolio
   42




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##### Table of Contents



43




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Faircost
    
    
    value
    
    
    cost
    
    
    value
    
    
    cost
    
    
    valueInvestment securities available for saleDebt securities:States and political subdivisions
    
    $
    416,847
    
    
    $
    422,844
    
    
    $
    295,639
    
    
    $
    299,747
    
    
    $
    359,153
    
    
    $
    361,360U.S. government agencies and government
sponsored enterprises
    
    
    340,806
    
    
    
    339,832
    
    
    
    29,968
    
    
    
    29,998
    
    
    
    28,817
    
    
    
    28,839Corporate
    
    
    3,395
    
    
    
    2,213
    
    
    
    5,028
    
    
    
    3,440
    
    
    
    3,788
    
    
    
    3,783Total debt securities
    
    
    761,048
    
    
    
    764,889
    
    
    
    330,635
    
    
    
    333,185
    
    
    
    391,758
    
    
    
    393,982Other
    
    
    3,651
    
    
    
    3,664
    
    
    
    5,307
    
    
    
    4,156
    
    
    
    5,307
    
    
    
    5,209Total debt and other securities
    
    $
    764,699
    
    
    $
    768,553
    
    
    $
    335,942
    
    
    $
    337,341
    
    
    $
    397,065
    
    
    $
    399,191Average remaining life of debt securities(1)
    
    2.8 years
    
    
    
    
    
    
    1.5 years
    
    
    
    
    
    
    1.5 yearsResidential mortgage-backed securities:GNMA
    
    $
    30,906
    
    
    $
    30,833
    
    
    $
    11,711
    
    
    $
    11,376
    
    
    $
    3,408
    
    
    $
    3,491FNMA
    
    
    101,578
    
    
    
    105,039
    
    
    
    146,646
    
    
    
    149,262
    
    
    
    106,297
    
    
    
    106,163FHLMC
    
    
    59,527
    
    
    
    62,746
    
    
    
    182,929
    
    
    
    188,838
    
    
    
    230,427
    
    
    
    230,452Collateralized mortgage obligations:GNMA
    
    
    1,977,458
    
    
    
    1,976,881
    
    
    
    24,257
    
    
    
    23,940
    
    
    
    
    
    
    
    FNMA
    
    
    692,614
    
    
    
    705,257
    
    
    
    179,657
    
    
    
    179,861
    
    
    
    54,441
    
    
    
    54,392FHLMC
    
    
    590,172
    
    
    
    602,023
    
    
    
    446,086
    
    
    
    450,091
    
    
    
    255,334
    
    
    
    254,689Non-agency issued
    
    
    173,080
    
    
    
    167,279
    
    
    
    263,432
    
    
    
    229,015
    
    
    
    169,872
    
    
    
    168,427Total collateralized mortgage obligations
    
    
    3,433,324
    
    
    
    3,451,440
    
    
    
    913,432
    
    
    
    882,907
    
    
    
    479,647
    
    
    
    477,508Total residential mortgage-backed securities
    
    $
    3,625,335
    
    
    $
    3,650,058
    
    
    $
    1,254,718
    
    
    $
    1,232,383
    
    
    $
    819,779
    
    
    $
    817,614Average remaining life of mortgage-backed
securities(1)
    
    2.9 years
    
    
    
    
    
    
    4.4 years
    
    
    
    
    
    
    5.2 yearsAsset-backed securities
    
    $
    3,165
    
    
    $
    3,067
    
    
    $
    3,499
    
    
    $
    3,377
    
    
    $
    360
    
    
    $
    359Average remaining life of asset-backed securities(1)
    
    10.1 years
    
    
    
    
    
    
    11.1 years
    
    
    
    
    
    
    4.2 yearsTotal securities available for sale
    
    $
    4,393,199
    
    
    $
    4,421,678
    
    
    $
    1,594,159
    
    
    $
    1,573,101
    
    
    $
    1,217,204
    
    
    $
    1,217,164Average remaining life of investment securities
available for sale(1)
    
    2.9 years
    
    
    
    
    
    
    3.8 years
    
    
    
    
    
    
    4.0 yearsInvestment securities held to maturityResidential mortgage-backed securities:Collateralized mortgage obligations:GNMA
    
    $
    467,473
    
    
    $
    471,810FNMA
    
    
    319,190
    
    
    
    323,278FHLMC
    
    
    306,889
    
    
    
    311,562Total residential mortgage-backed securities
    
    $
    1,093,552
    
    
    $
    1,106,650Average remaining life of investment securities
held to maturity(1)
    
    2.9 years
 (1)
    
    Average remaining life is computed utilizing estimated maturities and prepayment
assumptions.
  44




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##### Table of Contents



Funding Activities
 Deposits
    2009
    
    
    2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAmount
    
    
    Percent
    
    
    average rate
    
    
    Amount
    
    
    Percent
    
    
    average rate
    
    
    Amount
    
    
    Percent
    
    
    average rateCore deposits:Savings
    
    $
    916,854
    
    
    
    9.4
    %
    
    
    0.14
    %
    
    $
    788,767
    
    
    
    13.3
    %
    
    
    0.24
    %
    
    $
    786,759
    
    
    
    14.2
    %
    
    
    0.35
    %Interest-bearing
checking
    
    
    1,063,065
    
    
    
    10.9
    
    
    
    0.13
    
    
    
    485,220
    
    
    
    8.2
    
    
    
    0.17
    
    
    
    468,165
    
    
    
    8.4
    
    
    
    0.37Money market deposit
    
    
    3,535,736
    
    
    
    36.4
    
    
    
    0.72
    
    
    
    1,940,136
    
    
    
    32.6
    
    
    
    1.47
    
    
    
    1,607,137
    
    
    
    29.0
    
    
    
    3.69Noninterest-bearing
    
    
    1,256,537
    
    
    
    12.9
    
    
    
    
    
    
    
    718,593
    
    
    
    12.1
    
    
    
    
    
    
    
    631,801
    
    
    
    11.4
    
    
    
    Total core deposits
    
    
    6,772,192
    
    
    
    69.6
    
    
    
    0.41
    
    
    
    3,932,716
    
    
    
    66.2
    
    
    
    0.79
    
    
    
    3,493,862
    
    
    
    63.0
    
    
    
    1.83Certificates
    
    
    2,957,332
    
    
    
    30.4
    
    
    
    1.52
    
    
    
    2,010,897
    
    
    
    33.8
    
    
    
    2.79
    
    
    
    2,055,122
    
    
    
    37.0
    
    
    
    4.34Total deposits
    
    $
    9,729,524
    
    
    
    100.0
    %
    
    
    0.75
    %
    
    $
    5,943,613
    
    
    
    100.0
    %
    
    
    1.47
    %
    
    $
    5,548,984
    
    
    
    100.0
    %
    
    
    2.76
    %
  Upstate New
    
    
    WesternYork
    
    
    Pennsylvania
    
    
    Total depositsCore deposits:Savings
    
    $
    796,845
    
    
    $
    120,009
    
    
    $
    916,854Interest-bearing checking
    
    
    537,767
    
    
    
    525,298
    
    
    
    1,063,065Money market deposit
    
    
    2,654,865
    
    
    
    880,871
    
    
    
    3,535,736Noninterest-bearing
    
    
    795,322
    
    
    
    461,215
    
    
    
    1,256,537Total core deposits
    
    
    4,784,799
    
    
    
    1,987,393
    
    
    
    6,772,192Certificates
    
    
    1,385,402
    
    
    
    1,571,930
    
    
    
    2,957,332Total deposits
    
    $
    6,170,201
    
    
    $
    3,559,323
    
    
    $
    9,729,524
  45




---



##### Table of Contents



Over
    
    
    Over$100,000
    
    
    $250,000Less than three months
    
    $
    317,575
    
    
    $
    164,003Over three months to six months
    
    
    149,118
    
    
    
    67,652Over six months to 12 months
    
    
    166,246
    
    
    
    65,612Over 12 months
    
    
    232,369
    
    
    
    42,101Total
    
    $
    865,308
    
    
    $
    339,368
 Borrowings
  At or for the year ended December 31,2009
    
    
    2008
    
    
    2007Period-end balance:FHLB advances
    
    $
    631,703
    
    
    $
    1,005,467
    
    
    $
    715,808Repurchase agreements
    
    
    1,458,205
    
    
    
    462,418
    
    
    
    379,173Senior notes
    
    
    150,000
    
    
    
    
    
    
    
    Other borrowings
    
    
    62,372
    
    
    
    72,342
    
    
    
    Total borrowings
    
    $
    2,302,280
    
    
    $
    1,540,227
    
    
    $
    1,094,981Maximum balance at any month end:FHLB advances
    
    $
    3,435,825
    
    
    $
    1,194,195
    
    
    $
    716,243Repurchase agreements
    
    
    1,458,205
    
    
    
    462,418
    
    
    
    406,098Senior notes
    
    
    150,000
    
    
    
    
    
    
    
    Other borrowings
    
    
    62,372
    
    
    
    92,315
    
    
    
    20,000Average balance:FHLB advances
    
    $
    1,267,342
    
    
    $
    907,673
    
    
    $
    479,299Repurchase agreements
    
    
    582,151
    
    
    
    395,030
    
    
    
    367,549Senior notes
    
    
    48,904
    
    
    
    
    
    
    
    Other borrowings
    
    
    62,776
    
    
    
    69,610
    
    
    
    6,448Period-end weighted average interest rate:FHLB advances
    
    
    3.53
    %
    
    
    3.63
    %
    
    
    4.57
    %Repurchase agreements
    
    
    1.18
    
    
    
    3.31
    
    
    
    4.42Senior notes
    
    
    12.00
    
    
    
    
    
    
    
    Other
    
    
    1.98
    
    
    
    2.65
    
    
    
    
   Capital Resources
   46




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2009 AND DECEMBER 31, 2008
    Net Interest Income
     47




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Averageoutstanding
    
    
    Interest
    
    
    
    
    
    
    outstanding
    
    
    Interest
    
    
    
    
    
    
    outstanding
    
    
    Interestbalance
    
    
    earned/paid
    
    
    Yield/rate
    
    
    balance
    
    
    earned/paid
    
    
    Yield/rate
    
    
    balance
    
    
    earned/paid
    
    
    Yield/rateInterest-earning assets:Loans(1)
    
    $
    6,682,117
    
    
    $
    361,789
    
    
    
    5.41
    %
    
    $
    6,325,608
    
    
    $
    378,092
    
    
    
    5.97
    %
    
    $
    5,725,938
    
    
    $
    374,330
    
    
    
    6.53
    %Mortgage-backed securities(2)
    
    
    2,828,434
    
    
    
    114,168
    
    
    
    4.04
    
    
    
    946,398
    
    
    
    47,121
    
    
    
    4.98
    
    
    
    760,626
    
    
    
    32,822
    
    
    
    4.32Other investment securities(2)
    
    
    465,004
    
    
    
    17,496
    
    
    
    3.76
    
    
    
    380,786
    
    
    
    18,242
    
    
    
    4.79
    
    
    
    374,595
    
    
    
    18,137
    
    
    
    4.84Money market and other
investments
    
    
    175,633
    
    
    
    3,114
    
    
    
    1.77
    
    
    
    82,753
    
    
    
    4,038
    
    
    
    4.88
    
    
    
    53,979
    
    
    
    3,434
    
    
    
    6.36Total interest-earning assets
    
    
    10,151,188
    
    
    $
    496,567
    
    
    
    4.89
    %
    
    
    7,735,545
    
    
    $
    447,493
    
    
    
    5.78
    %
    
    
    6,915,138
    
    
    $
    428,723
    
    
    
    6.20
    %Noninterest-earning assets(3)(4)
    
    
    1,383,719
    
    
    
    
    
    
    
    
    
    
    
    1,227,596
    
    
    
    
    
    
    
    
    
    
    
    1,082,161Total assets
    
    $
    11,534,907
    
    
    
    
    
    
    
    
    
    
    $
    8,963,141
    
    
    
    
    
    
    
    
    
    
    $
    7,997,299Interest-bearing liabilities:Savings deposits
    
    $
    829,246
    
    
    $
    1,931
    
    
    
    0.23
    %
    
    $
    790,707
    
    
    $
    2,198
    
    
    
    0.28
    %
    
    $
    889,398
    
    
    $
    3,918
    
    
    
    0.44
    %Checking accounts
    
    
    680,606
    
    
    
    996
    
    
    
    0.15
    
    
    
    486,789
    
    
    
    1,378
    
    
    
    0.28
    
    
    
    487,173
    
    
    
    2,043
    
    
    
    0.42Money market deposits
    
    
    2,696,157
    
    
    
    27,700
    
    
    
    1.03
    
    
    
    1,899,010
    
    
    
    43,573
    
    
    
    2.29
    
    
    
    1,413,178
    
    
    
    52,249
    
    
    
    3.70Certificates of deposit
    
    
    2,290,845
    
    
    
    42,924
    
    
    
    1.87
    
    
    
    2,106,481
    
    
    
    71,534
    
    
    
    3.40
    
    
    
    2,263,933
    
    
    
    101,161
    
    
    
    4.47Borrowings
    
    
    1,961,173
    
    
    
    52,807
    
    
    
    2.68
    
    
    
    1,372,314
    
    
    
    53,878
    
    
    
    3.91
    
    
    
    853,297
    
    
    
    39,223
    
    
    
    4.58Total interest-bearing liabilities
    
    
    8,458,027
    
    
    $
    126,358
    
    
    
    1.49
    %
    
    
    6,655,301
    
    
    $
    172,561
    
    
    
    2.59
    %
    
    
    5,906,979
    
    
    $
    198,594
    
    
    
    3.36
    %Noninterest-bearing deposits
    
    
    897,684
    
    
    
    
    
    
    
    
    
    
    
    687,741
    
    
    
    
    
    
    
    
    
    
    
    627,259Other noninterest-bearing liabilities
    
    
    168,221
    
    
    
    
    
    
    
    
    
    
    
    143,775
    
    
    
    
    
    
    
    
    
    
    
    115,189Total liabilities
    
    
    9,523,932
    
    
    
    
    
    
    
    
    
    
    
    7,486,817
    
    
    
    
    
    
    
    
    
    
    
    6,649,427Stockholders equity(3)
    
    
    2,010,975
    
    
    
    
    
    
    
    
    
    
    
    1,476,324
    
    
    
    
    
    
    
    
    
    
    
    1,347,872Total
liabilities and stockholders equity
    
    $
    11,534,907
    
    
    
    
    
    
    
    
    
    
    $
    8,963,141
    
    
    
    
    
    
    
    
    
    
    $
    7,997,299Net interest income
    
    
    
    
    
    $
    370,209
    
    
    
    
    
    
    
    
    
    
    $
    274,932
    
    
    
    
    
    
    
    
    
    
    $
    230,129Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.40
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %
    
    
    
    
    
    
    
    
    
    
    2.84
    %Net earning assets
    
    $
    1,693,161
    
    
    
    
    
    
    
    
    
    
    $
    1,080,244
    
    
    
    
    
    
    
    
    
    
    $
    1,008,159Net interest rate margin
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    
    
    
    
    3.55
    %
    
    
    
    
    
    
    
    
    
    
    3.33
    %Ratio of average interest-earning
assets to average interest-bearing liabilities
    
    
    120.02
    %
    
    
    
    
    
    
    
    
    
    
    116.23
    %
    
    
    
    
    
    
    
    
    
    
    117.07
    %
 (1)
    
    Average outstanding balances are net of deferred costs and premiums and include
nonperforming loans and loans held for sale.(2)
    
    Average outstanding balances are amortized cost.(3)
    
    Average outstanding balances include unrealized gains/losses on securities available
for sale.(4)
    
    Average outstanding balances include bank-owned life insurance, earnings from which
are reflected in noninterest income, and our allowance for credit losses.  48




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##### Table of Contents



Rate/Volume Analysis
  2009 vs. 2008
    
    
    2008 vs. 2007Increase/(decrease)
    
    
    
    
    
    
    Increase/(decrease)due to
    
    
    Total increase
    
    
    due to
    
    
    Total increaseVolume
    
    
    Rate
    
    
    (decrease)
    
    
    Volume
    
    
    Rate
    
    
    (decrease)Interest-earning assets:Loans
    
    $
    20,497
    
    
    $
    (36,800
    )
    
    $
    (16,303
    )
    
    $
    21,035
    
    
    $
    (17,273
    )
    
    $
    3,762Mortgage-backed securities
    
    
    74,101
    
    
    
    (7,054
    )
    
    
    67,047
    
    
    
    8,773
    
    
    
    5,526
    
    
    
    14,299Other investment securities
    
    
    3,594
    
    
    
    (4,340
    )
    
    
    (746
    )
    
    
    298
    
    
    
    (193
    )
    
    
    105Money market and other investments
    
    
    (478
    )
    
    
    (446
    )
    
    
    (924
    )
    
    
    1,507
    
    
    
    (903
    )
    
    
    604Total interest-earning assets
    
    $
    97,714
    
    
    $
    (48,640
    )
    
    $
    49,074
    
    
    $
    31,613
    
    
    $
    (12,843
    )
    
    $
    18,770Interest-bearing liabilities:Savings deposits
    
    $
    115
    
    
    $
    (382
    )
    
    $
    (267
    )
    
    $
    (398
    )
    
    $
    (1,322
    )
    
    $
    (1,720
    )Checking accounts
    
    
    (20,181
    )
    
    
    19,799
    
    
    
    (382
    )
    
    
    10
    
    
    
    (675
    )
    
    
    (665
    )Money market deposits
    
    
    51,630
    
    
    
    (67,503
    )
    
    
    (15,873
    )
    
    
    12,347
    
    
    
    (21,023
    )
    
    
    (8,676
    )Certificates of deposit
    
    
    7,545
    
    
    
    (36,155
    )
    
    
    (28,610
    )
    
    
    (6,570
    )
    
    
    (23,057
    )
    
    
    (29,627
    )Borrowings
    
    
    18,824
    
    
    
    (19,895
    )
    
    
    (1,071
    )
    
    
    20,999
    
    
    
    (6,344
    )
    
    
    14,655Total interest-bearing liabilities
    
    $
    57,933
    
    
    $
    (104,136
    )
    
    $
    (46,203
    )
    
    $
    26,388
    
    
    $
    (52,421
    )
    
    $
    (26,033
    )Net interest income
    
    $
    39,781
    
    
    $
    55,496
    
    
    $
    95,277
    
    
    $
    5,225
    
    
    $
    39,578
    
    
    $
    44,803
 Provision for Credit Losses
   49




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##### Table of Contents



2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    77,793
    
    
    $
    70,247
    
    
    $
    71,913
    
    
    $
    72,340
    
    
    $
    41,422Charge-offs:Commercial:Real estate
    
    
    9,846
    
    
    
    5,617
    
    
    
    4,803
    
    
    
    1,422
    
    
    
    1,285Business
    
    
    5,810
    
    
    
    7,723
    
    
    
    1,607
    
    
    
    1,052
    
    
    
    2,402Specialized lending
    
    
    7,320
    
    
    
    4,241
    
    
    
    2,803
    
    
    
    2,512
    
    
    
    2,785Shared national credits
    
    
    8,556
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    31,532
    
    
    
    17,581
    
    
    
    9,213
    
    
    
    4,986
    
    
    
    6,472Residential real estate
    
    
    245
    
    
    
    143
    
    
    
    226
    
    
    
    295
    
    
    
    192Home equity
    
    
    876
    
    
    
    206
    
    
    
    100
    
    
    
    56
    
    
    
    34Other consumer
    
    
    2,493
    
    
    
    2,192
    
    
    
    2,362
    
    
    
    4,565
    
    
    
    3,926Total charge-offs
    
    
    35,146
    
    
    
    20,122
    
    
    
    11,901
    
    
    
    9,902
    
    
    
    10,624Recoveries:Commercial:Real estate
    
    
    167
    
    
    
    322
    
    
    
    74
    
    
    
    137
    
    
    
    864Business
    
    
    120
    
    
    
    263
    
    
    
    219
    
    
    
    911
    
    
    
    1,283Specialized lending
    
    
    732
    
    
    
    709
    
    
    
    680
    
    
    
    872
    
    
    
    525Shared national credits
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial
    
    
    1,032
    
    
    
    1,294
    
    
    
    973
    
    
    
    1,920
    
    
    
    2,672Residential real estate
    
    
    88
    
    
    
    66
    
    
    
    7
    
    
    
    37
    
    
    
    61Home equity
    
    
    5
    
    
    
    19
    
    
    
    2
    
    
    
    24
    
    
    
    Other consumer
    
    
    881
    
    
    
    899
    
    
    
    835
    
    
    
    1,038
    
    
    
    777Total recoveries
    
    
    2,006
    
    
    
    2,278
    
    
    
    1,817
    
    
    
    3,019
    
    
    
    3,510Net charge-offs
    
    
    33,140
    
    
    
    17,844
    
    
    
    10,084
    
    
    
    6,883
    
    
    
    7,114Provision for credit losses
    
    
    43,650
    
    
    
    22,500
    
    
    
    8,500
    
    
    
    6,456
    
    
    
    7,348Allowance obtained through acquisitions
    
    
    
    
    
    
    2,890
    
    
    
    
    
    
    
    
    
    
    
    30,684Loans sold
    
    
    
    
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    Balance at end of year
    
    $
    88,303
    
    
    $
    77,793
    
    
    $
    70,247
    
    
    $
    71,913
    
    
    $
    72,340Ratio of net charge-offs to average
loans outstanding
    
    
    0.50
    %
    
    
    0.28
    %
    
    
    0.18
    %
    
    
    0.12
    %
    
    
    0.14
    %Ratio of allowance for credit losses
to total loans
    
    
    1.20
    %
    
    
    1.20
    %
    
    
    1.23
    %
    
    
    1.27
    %
    
    
    1.37
    %Ratio of allowance for credit losses
to nonaccruing loans
    
    
    129
    %
    
    
    168
    %
    
    
    250
    %
    
    
    463
    %
    
    
    330
    %
 Noninterest Income
   Noninterest Expenses
   50




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##### Table of Contents



Income Taxes
  RESULTS
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2007
  Net Interest Income
    51




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##### Table of Contents



Provision for Credit Losses
  Noninterest Income
  Noninterest Expenses
  Income Taxes
   52




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
      53




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##### Table of Contents



Contractual Obligations and Other Commitments (1)
  Less than
    
    
    Over 1 to 3
    
    
    Over 3 to 5
    
    
    Over1 year
    
    
    years
    
    
    years
    
    
    5 years
    
    
    TotalCertificates of deposit
    
    $
    2,074,683
    
    
    $
    702,572
    
    
    $
    118,069
    
    
    $
    62,008
    
    
    $
    2,957,332Borrowings
    
    
    1,674,761
    
    
    
    370,583
    
    
    
    226,809
    
    
    
    30,127
    
    
    
    2,302,280Commitments to extend credit (2)
    
    
    2,158,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,158,424Standby letters of credit (2)
    
    
    142,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,900Purchase obligations
    
    
    11,285
    
    
    
    26,216
    
    
    
    28,698
    
    
    
    31,380
    
    
    
    97,579Operating leases
    
    
    9,826
    
    
    
    16,839
    
    
    
    14,623
    
    
    
    34,381
    
    
    
    75,669Capital leases
    
    
    439
    
    
    
    1,963
    
    
    
    3,112
    
    
    
    19,962
    
    
    
    25,476Partnership investment commitments
    
    
    125
    
    
    
    
    
    
    
    266
    
    
    
    1,690
    
    
    
    2,081Total contractual obligations
    
    $
    6,072,443
    
    
    $
    1,118,173
    
    
    $
    391,577
    
    
    $
    179,548
    
    
    $
    7,761,741
 (1)
    
    Amounts do not include contractual interest.(2)
    
    We do not expect all of our commitments to extend credit and standby
letters of credit to be fully funded. Thus, the total commitment amounts do not necessarily
represent our future cash requirements. Our commitments to extend credit include $1.9 billion
available under lines of credit, which generally expire one year from the date of origination
if unfunded. Loan Commitments
      54




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##### Table of Contents



Security Yields, Maturities and Repricing Schedule
  More than one
    
    
    More than fiveOne year or less
    
    
    year to five years
    
    
    years to ten years
    
    
    After ten years
    
    
    TotalCarrying
    
    
    
    Weighted
    
    
    Carrying
    
    
    
    Weighted
    
    
    Carrying
    
    
    
    Weighted
    
    
    Carrying
    
    
    
    Weighted
    
    
    Carrying
    
    
    
    Weightedvalue
    
    
    
    average yield
    
    
    value
    
    
    
    average yield
    
    
    value
    
    
    
    average yield
    
    
    value
    
    
    
    average yield
    
    
    value
    
    
    
    average yieldInvestment securities available for saleDebt securities:States and political subdivisions
    
    $
    286,118
    
    
    
    2.20
    %
    
    $
    113,132
    
    
    
    3.00
    %
    
    $
    23,594
    
    
    
    2.46
    %
    
    $
    
    
    
    
    
    %
    
    $
    422,844
    
    
    
    2.43
    %U.S. Government agencies and
government sponsored enterprises
    
    
    150,365
    
    
    
    2.42
    
    
    
    189,467
    
    
    
    2.62
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,832
    
    
    
    2.53Corporate
    
    
    250
    
    
    
    4.25
    
    
    
    1,488
    
    
    
    1.31
    
    
    
    
    
    
    
    
    
    
    
    475
    
    
    
    3.17
    
    
    
    2,213
    
    
    
    2.04Total debt securities
    
    
    436,733
    
    
    
    2.28
    
    
    
    304,087
    
    
    
    2.76
    
    
    
    23,594
    
    
    
    2.46
    
    
    
    475
    
    
    
    3.17
    
    
    
    764,889
    
    
    
    2.48Residential mortgage-backed securities:GNMA
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    7.78
    
    
    
    30,478
    
    
    
    4.22
    
    
    
    30,833
    
    
    
    4.26FNMA
    
    
    
    
    
    
    
    
    
    
    12,301
    
    
    
    4.21
    
    
    
    44,624
    
    
    
    4.38
    
    
    
    48,114
    
    
    
    3.75
    
    
    
    105,039
    
    
    
    4.07FHLMC
    
    
    22
    
    
    
    6.53
    
    
    
    3,633
    
    
    
    4.85
    
    
    
    13,089
    
    
    
    4.52
    
    
    
    46,002
    
    
    
    5.40
    
    
    
    62,746
    
    
    
    5.18CMOs
    
    
    
    
    
    
    
    
    
    
    14,586
    
    
    
    4.56
    
    
    
    211,516
    
    
    
    4.47
    
    
    
    3,225,338
    
    
    
    4.36
    
    
    
    3,451,440
    
    
    
    4.36Total mortgage-backed securities
    
    
    22
    
    
    
    6.53
    
    
    
    30,520
    
    
    
    4.45
    
    
    
    269,584
    
    
    
    4.46
    
    
    
    3,349,932
    
    
    
    4.36
    
    
    
    3,650,058
    
    
    
    4.37Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,067
    
    
    
    0.90
    
    
    
    3,067
    
    
    
    0.90Other(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,664
    
    
    
    4.11Total securities available for sale
    
    $
    436,755
    
    
    
    2.28
    %
    
    $
    334,607
    
    
    
    2.91
    %
    
    $
    293,178
    
    
    
    4.30
    %
    
    $
    3,353,474
    
    
    
    4.36
    %
    
    $
    4,421,678
    
    
    
    4.04
    %Investment securities held to maturityResidential mortgage-backed securities:CMOs
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,093,552
    
    
    
    4.47
    %
    
    $
    1,093,552
    
    
    
    4.47
    %
 (1)
    
    Other securities available for sale include investments with no stated
maturity date.  55




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##### Table of Contents



Loan Maturity and Repricing Schedule
  One through fiveWithin one year
    
    
    years
    
    
    After five years
    
    
    TotalCommercial:Real estate
    
    $
    1,015,184
    
    
    $
    1,480,804
    
    
    $
    217,554
    
    
    $
    2,713,542Construction
    
    
    341,076
    
    
    
    6,894
    
    
    
    70
    
    
    
    348,040Business
    
    
    1,180,880
    
    
    
    247,626
    
    
    
    53,339
    
    
    
    1,481,845Specialized lending
    
    
    96,949
    
    
    
    110,800
    
    
    
    
    
    
    
    207,749Total commercial
    
    
    2,634,089
    
    
    
    1,846,124
    
    
    
    270,963
    
    
    
    4,751,176Residential real estate
    
    
    296,499
    
    
    
    480,196
    
    
    
    898,266
    
    
    
    1,674,961Home equity
    
    
    407,457
    
    
    
    95,000
    
    
    
    188,612
    
    
    
    691,069Other consumer
    
    
    85,659
    
    
    
    51,606
    
    
    
    49,076
    
    
    
    186,341Total loans and leases
    
    $
    3,423,704
    
    
    $
    2,472,926
    
    
    $
    1,406,917
    
    
    $
    7,303,547
  Fixed
    
    
    Adjustable
    
    
    TotalCommercial:Real estate
    
    $
    786,965
    
    
    $
    911,393
    
    
    $
    1,698,358Construction
    
    
    6,964
    
    
    
    
    
    
    
    6,964Business
    
    
    256,657
    
    
    
    44,308
    
    
    
    300,965Specialized lending
    
    
    110,800
    
    
    
    
    
    
    
    110,800Total commercial
    
    
    1,161,386
    
    
    
    955,701
    
    
    
    2,117,087Residential real estate
    
    
    1,289,170
    
    
    
    89,292
    
    
    
    1,378,462Home equity
    
    
    283,612
    
    
    
    
    
    
    
    283,612Other consumer
    
    
    100,682
    
    
    
    
    
    
    
    100,682Total loans and leases
    
    $
    2,834,850
    
    
    $
    1,044,993
    
    
    $
    3,879,843
 Cash and Cash Equivalents
  FOURTH QUARTER RESULTS
   56




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##### Table of Contents



IMPACT OF NEW ACCOUNTING STANDARDS
     57




---



##### Table of Contents



ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
     Net Interest Income Analysis
   58




---



##### Table of Contents



Calculated increase (decrease) at December 31,2009
    
    
    2008Net interest
    
    
    
    
    
    
    Net interestChanges in interest rates
    
    income
    
    
    % Change
    
    
    income
    
    
    % Change+200 basis points
    
    $
    (2,837
    )
    
    
    (0.6
    )%
    
    $
    (5,376
    )
    
    
    (2.4
    )%+100 basis points
    
    
    (828
    )
    
    
    (0.2
    )
    
    
    (2,119
    )
    
    
    (0.9
    )-100 basis points
    
    
    
    (1)
    
    
    
    (1)
    
    
    4,307
    
    
    
    1.9-200 basis points
    
    
    
    (1)
    
    
    
    (1)
    
    
    6,626
    
    
    
    3.0
 (1)
    
    The Federal Reserve benchmark overnight federal funds rate was 0.25% at
December 31, 2009, therefore, the calculation of the effect of the decrease in interest rates
is not measurable.   59




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Managements Report on Internal Control Over Financial Reporting
   /s/ John R. Koelmel

John R. Koelmel
    
    
    
    /s/ Michael W. Harrington

Michael W. HarringtonPresident and Chief Executive Officer
    
    
    
    Chief Financial Officer
  60




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control
- Integrated Framework .
    Internal Control 
Integrated Framework
  
  61




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Business Combinations Business
Combinations)
 Internal Control  Integrated Framework
 
  62




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Condition
 December
31,2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    232,268
    
    
    
    110,552Restricted cash
    
    
    4,000
    
    
    
    3,999Investment securities:Available for sale, at estimated fair value
    
    
    4,421,678
    
    
    
    1,573,101Held to maturity, at amortized cost (estimated fair value of $1,106,650)
    
    
    1,093,552
    
    
    
    Loans held for sale
    
    
    32,270
    
    
    
    1,698Loans and leases (net of allowance for credit losses of $88,303
and $77,793 in 2009 and 2008)
    
    
    7,208,883
    
    
    
    6,384,284Bank-owned life insurance
    
    
    132,414
    
    
    
    127,151Premises and equipment, net
    
    
    156,213
    
    
    
    95,978Goodwill
    
    
    879,107
    
    
    
    748,971Core deposit and other intangibles, net
    
    
    56,277
    
    
    
    35,578Other assets
    
    
    368,171
    
    
    
    250,060Total assets
    
    $
    14,584,833
    
    
    
    9,331,372LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits
    
    $
    9,729,524
    
    
    
    5,943,613Short-term borrowings
    
    
    1,674,761
    
    
    
    717,464Long-term borrowings
    
    
    627,519
    
    
    
    822,763Other
    
    
    179,368
    
    
    
    120,269Total liabilities
    
    
    12,211,172
    
    
    
    7,604,109Commitments and contingent liabilities (Note 12)Stockholders equity:Preferred stock, $0.01 par value, 50,000,000 shares authorized;
Series A, cumulative perpetual preferred stock, $1,000 liquidation value,
184,011 shares issued and outstanding in 2008 (Note 13)
    
    
    
    
    
    
    176,719Common stock, $0.01 par value, 250,000,000 shares authorized;
194,810,261 and 125,419,261 shares issued in 2009 and 2008
    
    
    1,948
    
    
    
    1,254Additional paid-in capital
    
    
    2,128,196
    
    
    
    1,326,159Retained earnings
    
    
    352,948
    
    
    
    369,671Accumulated other comprehensive income (loss)
    
    
    2,514
    
    
    
    (29,429
    )Common stock held by ESOP, 2,874,196 and 3,094,365 shares
in 2009 and 2008
    
    
    (22,382
    )
    
    
    (23,843
    )Treasury stock, at cost, 6,595,500 and 6,857,554 shares
in 2009 and 2008
    
    
    (89,563
    )
    
    
    (93,268
    )Total stockholders equity
    
    
    2,373,661
    
    
    
    1,727,263Total liabilities and stockholders equity
    
    $
    14,584,833
    
    
    
    9,331,372
   63




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Income
 Year ended December 31,2009
    
    
    2008
    
    
    2007Interest income:Loans and leases
    
    $
    360,689
    
    
    
    377,037
    
    
    
    376,123Investment securities and other
    
    
    130,069
    
    
    
    64,101
    
    
    
    46,649Total interest income
    
    
    490,758
    
    
    
    441,138
    
    
    
    422,772Interest expense:Deposits
    
    
    73,551
    
    
    
    118,683
    
    
    
    159,371Borrowings
    
    
    52,807
    
    
    
    53,878
    
    
    
    39,223Total interest expense
    
    
    126,358
    
    
    
    172,561
    
    
    
    198,594Net interest income
    
    
    364,400
    
    
    
    268,577
    
    
    
    224,178Provision for credit losses
    
    
    43,650
    
    
    
    22,500
    
    
    
    8,500Net interest income after provision for credit losses
    
    
    320,750
    
    
    
    246,077
    
    
    
    215,678Noninterest income:Banking services
    
    
    49,538
    
    
    
    40,082
    
    
    
    39,289Insurance and benefits consulting
    
    
    48,958
    
    
    
    49,733
    
    
    
    51,646Lending and leasing
    
    
    10,888
    
    
    
    8,783
    
    
    
    8,880Wealth management services
    
    
    8,555
    
    
    
    9,922
    
    
    
    9,494Bank owned life insurance
    
    
    5,251
    
    
    
    5,449
    
    
    
    4,848Gain (loss) on sale of securities , net
    
    
    1,211
    
    
    
    
    
    
    
    (5,395
    )Gain on sale of branches, net
    
    
    
    
    
    
    
    
    
    
    21,564Other
    
    
    1,574
    
    
    
    1,766
    
    
    
    1,485Total noninterest income
    
    
    125,975
    
    
    
    115,735
    
    
    
    131,811Noninterest expense:Salaries and employee benefits
    
    
    161,548
    
    
    
    133,785
    
    
    
    125,697Merger and acquisition integration expenses
    
    
    31,467
    
    
    
    2,186
    
    
    
    86Occupancy and equipment
    
    
    29,113
    
    
    
    23,823
    
    
    
    28,550Technology and communications
    
    
    24,770
    
    
    
    19,849
    
    
    
    19,454Federal deposit insurance premiums
    
    
    16,668
    
    
    
    1,265
    
    
    
    916Marketing and advertising
    
    
    10,281
    
    
    
    10,496
    
    
    
    8,341Amortization of core deposit and other intangibles
    
    
    9,418
    
    
    
    8,824
    
    
    
    10,433Professional services
    
    
    6,131
    
    
    
    4,659
    
    
    
    4,385Charitable contributions
    
    
    6,037
    
    
    
    531
    
    
    
    649Other
    
    
    31,239
    
    
    
    22,992
    
    
    
    23,955Total noninterest expense
    
    
    326,672
    
    
    
    228,410
    
    
    
    222,466Income before income taxes
    
    
    120,053
    
    
    
    133,402
    
    
    
    125,023Income taxes
    
    
    40,676
    
    
    
    44,964
    
    
    
    40,938Net income
    
    
    79,377
    
    
    
    88,438
    
    
    
    84,085Preferred stock dividend
    
    
    3,731
    
    
    
    1,022
    
    
    
    Accretion of preferred stock discount
    
    
    8,315
    
    
    
    162
    
    
    
    Net income available to common stockholders
    
    $
    67,331
    
    
    
    87,254
    
    
    
    84,085Earnings per common share:Basic
    
    $
    0.46
    
    
    
    0.81
    
    
    
    0.82Diluted
    
    
    0.46
    
    
    
    0.81
    
    
    
    0.81Weighted average common shares outstanding:Basic
    
    
    146,833
    
    
    
    107,531
    
    
    
    102,838Diluted
    
    
    147,205
    
    
    
    108,174
    
    
    
    103,472Dividends per common share
    
    $
    0.56
    
    
    
    0.56
    
    
    
    0.54
   64




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
 Year ended December 31,2009
    
    
    2008
    
    
    2007Net income
    
    $
    79,377
    
    
    
    88,438
    
    
    
    84,085Other comprehensive income (loss), net of income taxes:Securities available for sale:Net unrealized holding gains (losses) arising during the year
    
    
    30,652
    
    
    
    (12,692
    )
    
    
    10,884Reclassification adjustment for realized (gains) losses
included in net income
    
    
    (731
    )
    
    
    
    
    
    
    3,24229,921
    
    
    
    (12,692
    )
    
    
    14,126Net unrealized gains (losses) on interest rate swaps arising during the period
    
    
    206
    
    
    
    (1,360
    )
    
    
    Pension and post-retirement actuarial gain (loss)
    
    
    1,816
    
    
    
    (12,773
    )
    
    
    3,147Total other comprehensive income (loss)
    
    
    31,943
    
    
    
    (26,825
    )
    
    
    17,273Total comprehensive income
    
    $
    111,320
    
    
    
    61,613
    
    
    
    101,358
   65




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY  Consolidated Statements of Changes in Stockholders Equity
 Accumulated
    
    
    CommonAdditional
    
    
    
    
    
    
    other
    
    
    stockPreferred
    
    
    Common
    
    
    paid-in
    
    
    Retained
    
    
    comprehensive
    
    
    held by
    
    
    Treasurystock
    
    
    stock
    
    
    capital
    
    
    earnings
    
    
    (loss) income
    
    
    ESOP
    
    
    stock
    
    
    TotalBalances at January 1, 2007
    
    $
    
    
    
    
    1,200
    
    
    
    1,237,816
    
    
    
    322,745
    
    
    
    (19,877
    )
    
    
    (26,816
    )
    
    
    (127,871
    )
    
    
    1,387,197Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,085
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,085Total other comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,273
    
    
    
    
    
    
    
    
    
    
    
    17,273Purchase of treasury stock (6,964,565 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95,690
    )
    
    
    (95,690
    )ESOP shares released (221,291 shares)
    
    
    
    
    
    
    
    
    
    
    1,544
    
    
    
    
    
    
    
    
    
    
    
    1,466
    
    
    
    
    
    
    
    3,010Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    6,288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,288Net tax benefit related to stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    2,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,241Exercise of stock options and restricted
stock activity (1,016,144 shares)
    
    
    
    
    
    
    
    
    
    
    (3,123
    )
    
    
    (6,275
    )
    
    
    
    
    
    
    
    
    
    
    14,072
    
    
    
    4,674Common stock dividends of $0.54 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,899
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,899
    )Balances at December 31, 2007
    
    $
    
    
    
    
    1,200
    
    
    
    1,244,766
    
    
    
    344,656
    
    
    
    (2,604
    )
    
    
    (25,350
    )
    
    
    (209,489
    )
    
    
    1,353,179Change in accounting for defined
benefit plans, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (117
    )Balances at January 1, 2008
    
    
    
    
    
    
    1,200
    
    
    
    1,244,766
    
    
    
    344,539
    
    
    
    (2,604
    )
    
    
    (25,350
    )
    
    
    (209,489
    )
    
    
    1,353,062Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,438Total other comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,825
    )
    
    
    
    
    
    
    
    
    
    
    (26,825
    )Purchase of treasury stock (625,000 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,795
    )
    
    
    (6,795
    )Common stock issued for the acquisition of
Great Lakes Bancorp, Inc. (5,374,525 shares)
    
    
    
    
    
    
    54
    
    
    
    73,728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,782Proceeds from follow-on stock offering, net of
related expenses (8,515,419 shares)
    
    
    
    
    
    
    
    
    
    
    (6,979
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,817
    
    
    
    108,838Preferred stock issued, net of related
expenses (184,011 shares)
    
    
    175,697
    
    
    
    
    
    
    
    (82
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,615Accretion of preferred stock discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (162
    )Warrant issued (1,906,191 shares)
    
    
    
    
    
    
    
    
    
    
    8,476
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,476ESOP shares released (229,297 shares)
    
    
    
    
    
    
    
    
    
    
    1,683
    
    
    
    
    
    
    
    
    
    
    
    1,507
    
    
    
    
    
    
    
    3,190Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    5,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,633Net tax benefit related to stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    714Exercise of stock options and restricted
stock activity (526,506 shares)
    
    
    
    
    
    
    
    
    
    
    (1,780
    )
    
    
    (2,051
    )
    
    
    
    
    
    
    
    
    
    
    7,199
    
    
    
    3,368Cumulative dividends on preferred stock
    
    
    1,022
    
    
    
    
    
    
    
    
    
    
    
    (1,022
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock dividends of $0.56 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,071
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60,071
    )Balances at December 31, 2008
    
    $
    176,719
    
    
    
    1,254
    
    
    
    1,326,159
    
    
    
    369,671
    
    
    
    (29,429
    )
    
    
    (23,843
    )
    
    
    (93,268
    )
    
    
    1,727,263Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,377Total other comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,943
    
    
    
    
    
    
    
    
    
    
    
    31,943Proceeds from follow-on stock offerings, net of
related expenses (69,391,000 shares)
    
    
    
    
    
    
    694
    
    
    
    801,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    802,215Preferred stock redemption
    
    
    (184,011
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (184,011
    )Repurchase of common stock warrant
    
    
    
    
    
    
    
    
    
    
    (2,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,700
    )ESOP shares released (220,169 shares)
    
    
    
    
    
    
    
    
    
    
    1,322
    
    
    
    
    
    
    
    
    
    
    
    1,461
    
    
    
    
    
    
    
    2,783Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    5,186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,186Net tax expense related to stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Exercise of stock options and restricted
stock activity (262,054 shares)
    
    
    
    
    
    
    
    
    
    
    (3,282
    )
    
    
    (896
    )
    
    
    
    
    
    
    
    
    
    
    3,705
    
    
    
    (473
    )Accretion of preferred stock discount
    
    
    8,315
    
    
    
    
    
    
    
    
    
    
    
    (8,315
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends on cumulative preferred stock
    
    
    (1,023
    )
    
    
    
    
    
    
    
    
    
    
    (3,731
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,754
    )Common stock dividends of $0.56 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,158
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,158
    )Balances at December 31, 2009
    
    $
    
    
    
    
    1,948
    
    
    
    2,128,196
    
    
    
    352,948
    
    
    
    2,514
    
    
    
    (22,382
    )
    
    
    (89,563
    )
    
    
    2,373,661
   66




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY  Consolidated Statements of Cash Flows
 Year ended December 31,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    79,377
    
    
    
    88,438
    
    
    
    84,085Adjustments to reconcile net income to net cash
provided by operating activities:Amortization of fees and discounts, net
    
    
    22,299
    
    
    
    6,566
    
    
    
    5,695Provision for credit losses
    
    
    43,650
    
    
    
    22,500
    
    
    
    8,500Depreciation of premises and equipment
    
    
    13,338
    
    
    
    10,637
    
    
    
    11,763Amortization of core deposit and other intangibles
    
    
    9,418
    
    
    
    8,824
    
    
    
    10,433Origination of loans held for sale
    
    
    (474,450
    )
    
    
    (100,072
    )
    
    
    (91,399
    )Proceeds from sales of loans held for sale
    
    
    443,874
    
    
    
    101,821
    
    
    
    91,606Increase in
prepaid FDIC insurance
    
    
    (38,269
    )
    
    
    
    
    
    
    Gain on sale of branches
    
    
    
    
    
    
    
    
    
    
    (21,564
    )ESOP and stock based compensation expense
    
    
    7,969
    
    
    
    8,823
    
    
    
    9,281Deferred income tax expense (benefit)
    
    
    3,547
    
    
    
    2,911
    
    
    
    (3,895
    )Other, net
    
    
    5,815
    
    
    
    (12,628
    )
    
    
    (1,838
    )Net cash provided by operating activities
    
    
    116,568
    
    
    
    137,820
    
    
    
    102,667Cash flows from investing activities:Proceeds from sales of securities available for sale
    
    
    143,651
    
    
    
    
    
    
    
    194,481Proceeds from maturities of securities available for sale
    
    
    1,103,383
    
    
    
    431,035
    
    
    
    274,272Principal payments received on securities available for sale
    
    
    548,486
    
    
    
    197,284
    
    
    
    153,457Purchases of securities available for sale
    
    
    (4,603,803
    )
    
    
    (797,290
    )
    
    
    (594,923
    )Principal payments received on securities held to maturity
    
    
    60,742
    
    
    
    
    
    
    
    Purchases of securities held to maturity
    
    
    (1,157,858
    )
    
    
    
    
    
    
    Loan originations in excess of principal payments
    
    
    (164,071
    )
    
    
    (214,148
    )
    
    
    (271,011
    )Advance to Harleysville National Corporation
    
    
    (50,000
    )
    
    
    
    
    
    
    Cash received from (paid for) acquisitions
    
    
    3,062,415
    
    
    
    (83,744
    )
    
    
    (10,806
    )Net cash distributed for branch sales
    
    
    
    
    
    
    
    
    
    
    (93,143
    )Other, net
    
    
    (53,359
    )
    
    
    (13,308
    )
    
    
    (26,988
    )Net cash used in investing activities
    
    
    (1,110,414
    )
    
    
    (480,171
    )
    
    
    (374,661
    )Cash flows from financing activities:Net decrease in deposits
    
    
    (176,292
    )
    
    
    (198,871
    )
    
    
    (6,211
    )Proceeds from (repayments of) short-term borrowings, net
    
    
    758,389
    
    
    
    (18,180
    )
    
    
    (28,893
    )Proceeds from long-term borrowings
    
    
    150,000
    
    
    
    363,500
    
    
    
    406,100Repayments of long-term borrowings
    
    
    (144,454
    )
    
    
    (34,868
    )
    
    
    (27,225
    )Proceeds from exercise of stock options
    
    
    332
    
    
    
    3,715
    
    
    
    4,910Excess tax (expense) benefit from stock based compensation
    
    
    (10
    )
    
    
    714
    
    
    
    2,241(Redemption) issuance of preferred stock, net
    
    
    (184,011
    )
    
    
    175,453
    
    
    
    Issuance of common stock in follow-on stock offerings, net
    
    
    802,215
    
    
    
    108,838
    
    
    
    (Repurchase) issuance of common stock warrant
    
    
    (2,700
    )
    
    
    8,476
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    (6,795
    )
    
    
    (95,690
    )Dividends paid on cumulative preferred stock
    
    
    (4,754
    )
    
    
    
    
    
    
    Dividends paid on common stock
    
    
    (83,152
    )
    
    
    (60,071
    )
    
    
    (55,899
    )Net cash provided by financing activities
    
    
    1,115,563
    
    
    
    341,911
    
    
    
    199,333Net increase (decrease) in cash and cash equivalents
    
    
    121,717
    
    
    
    (440
    )
    
    
    (72,661
    )Cash and cash equivalents at beginning of year
    
    
    114,551
    
    
    
    114,991
    
    
    
    187,652Cash and cash equivalents at end of year
    
    $
    236,268
    
    
    
    114,551
    
    
    
    114,991Cash paid during the year for:Income taxes
    
    $
    31,218
    
    
    
    45,965
    
    
    
    37,204Interest expense
    
    
    127,405
    
    
    
    172,856
    
    
    
    196,493Noncash activity:Loans transferred to other real estate owned
    
    $
    8,630
    
    
    
    4,232
    
    
    
    430Loans securitized
    
    
    
    
    
    
    
    
    
    
    164,284Change in funded status of benefit plans
    
    
    490
    
    
    
    (21,337
    )
    
    
    6,811Capital lease obligation
    
    
    11,928
    
    
    
    
    
    
    
    Acquisitions and dispositions of noncash assets and liabilities:Assets acquired, net of dispositions
    
    $
    911,719
    
    
    
    908,466
    
    
    
    11,370Liabilities assumed, net of dispositions
    
    
    3,974,134
    
    
    
    750,943
    
    
    
    563Assets sold in branch sales
    
    
    
    
    
    
    
    
    
    
    38,638Liabilities sold in branch sales
    
    
    
    
    
    
    
    
    
    
    154,541
   67




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##### Table of Contents



FIRST NIAGARA FINANCIAL GROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
Years ended December 31, 2009, 2008, and 2007
 Note 1. Summary of Significant Accounting Policies
    Principles of Consolidation
  Subsequent Events
  Cash and Cash Equivalents
  Restricted Cash
  Investment Securities
   68




---



##### Table of Contents



Loans and Leases
      Acquired Loans
   69




---



##### Table of Contents



Allowance for Credit Losses
  Premises and Equipment
  Goodwill and Intangible Assets
    70




---



##### Table of Contents



Interest Rate Swaps
  Employee Benefits
   st
  71




---



##### Table of Contents



Stock-Based Compensation
  Income Taxes
  Earnings per Share
  Investment and Fiduciary Services
  Use of Estimates
  Accounting Standards Adopted in 2009
  Accounting Standards Not Adopted as of December 31, 2009
   72




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##### Table of Contents



Note 2. Acquisitions
 National City Bank branches
   Cash and cash equivalents, net
    
    $
    3,062,789Loans, net
    
    
    717,328Premises and equipment
    
    
    26,731Goodwill
    
    
    130,079Core deposit intangible
    
    
    29,800Other assets
    
    
    7,407Total assets acquired
    
    $
    3,974,134Deposits
    
    $
    3,961,702Other liabilities
    
    
    12,432Total liabilities assumed
    
    $
    3,974,134
      73




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Harleysville National Corporation
     74




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##### Table of Contents



Note 3. Investment Securities
  Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAt December 31, 2009:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    416,847
    
    
    $
    6,037
    
    
    $
    (40
    )
    
    $
    422,844U.S. government agencies and government
sponsored enterprises
    
    
    340,806
    
    
    
    190
    
    
    
    (1,164
    )
    
    
    339,832Corporate
    
    
    3,395
    
    
    
    40
    
    
    
    (1,222
    )
    
    
    2,213Total debt securities
    
    
    761,048
    
    
    
    6,267
    
    
    
    (2,426
    )
    
    
    764,889Residential mortgage-backed securities:Government National Mortgage Association
    
    
    30,906
    
    
    
    170
    
    
    
    (243
    )
    
    
    30,833Federal National Mortgage Association
    
    
    101,578
    
    
    
    3,471
    
    
    
    (10
    )
    
    
    105,039Federal Home Loan Mortgage Corporation
    
    
    59,527
    
    
    
    3,229
    
    
    
    (10
    )
    
    
    62,746Collateralized mortgage obligations:Government National Mortgage Association
    
    
    1,977,458
    
    
    
    15,319
    
    
    
    (15,896
    )
    
    
    1,976,881Federal National Mortgage Association
    
    
    692,614
    
    
    
    14,290
    
    
    
    (1,647
    )
    
    
    705,257Federal Home Loan Mortgage Corporation
    
    
    590,172
    
    
    
    12,604
    
    
    
    (753
    )
    
    
    602,023Non-agency issued
    
    
    173,080
    
    
    
    1,344
    
    
    
    (7,145
    )
    
    
    167,279Total collateralized mortgage obligations
    
    
    3,433,324
    
    
    
    43,557
    
    
    
    (25,441
    )
    
    
    3,451,440Total mortgage-backed securities
    
    
    3,625,335
    
    
    
    50,427
    
    
    
    (25,704
    )
    
    
    3,650,058Asset-backed securities
    
    
    3,165
    
    
    
    
    
    
    
    (98
    )
    
    
    3,067Other
    
    
    3,651
    
    
    
    13
    
    
    
    
    
    
    
    3,664Total securities available for sale
    
    $
    4,393,199
    
    
    $
    56,707
    
    
    $
    (28,228
    )
    
    $
    4,421,678Investment securities held to maturity:Residential mortgage-backed securities:Collateralized mortgage obligations:Government National Mortgage Association
    
    
    467,473
    
    
    
    4,792
    
    
    
    (455
    )
    
    
    471,810Federal National Mortgage Association
    
    
    319,190
    
    
    
    4,195
    
    
    
    (107
    )
    
    
    323,278Federal Home Loan Mortgage Corporation
    
    
    306,889
    
    
    
    4,673
    
    
    
    
    
    
    
    311,562Total securities held to maturity
    
    $
    1,093,552
    
    
    $
    13,660
    
    
    $
    (562
    )
    
    $
    1,106,650
  75




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##### Table of Contents



Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAt December 31, 2008:
    
    cost
    
    
    gains
    
    
    losses
    
    
    valueInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    295,639
    
    
    $
    4,160
    
    
    $
    (52
    )
    
    $
    299,747U.S. government agencies and government
sponsored enterprises
    
    
    29,968
    
    
    
    50
    
    
    
    (20
    )
    
    
    29,998Corporate
    
    
    5,028
    
    
    
    1
    
    
    
    (1,589
    )
    
    
    3,440Total debt securities
    
    
    330,635
    
    
    
    4,211
    
    
    
    (1,661
    )
    
    
    333,185Residential mortgage-backed securities:Government National Mortgage Association
    
    
    11,711
    
    
    
    64
    
    
    
    (399
    )
    
    
    11,376Federal National Mortgage Association
    
    
    146,646
    
    
    
    2,916
    
    
    
    (300
    )
    
    
    149,262Federal Home Loan Mortgage Corporation
    
    
    182,929
    
    
    
    5,921
    
    
    
    (12
    )
    
    
    188,838Collateralized mortgage obligations:Government National Mortgage Association
    
    
    24,257
    
    
    
    87
    
    
    
    (404
    )
    
    
    23,940Federal National Mortgage Association
    
    
    179,657
    
    
    
    1,398
    
    
    
    (1,194
    )
    
    
    179,861Federal Home Loan Mortgage Corporation
    
    
    446,086
    
    
    
    4,074
    
    
    
    (69
    )
    
    
    450,091Non-agency issued
    
    
    263,432
    
    
    
    106
    
    
    
    (34,523
    )
    
    
    229,015Total collateralized mortgage obligations
    
    
    913,432
    
    
    
    5,665
    
    
    
    (36,190
    )
    
    
    882,907Total mortgage-backed securities
    
    
    1,254,718
    
    
    
    14,566
    
    
    
    (36,901
    )
    
    
    1,232,383Asset-backed securities
    
    
    3,499
    
    
    
    
    
    
    
    (122
    )
    
    
    3,377Other
    
    
    5,307
    
    
    
    8
    
    
    
    (1,159
    )
    
    
    4,156Total securities available for sale
    
    $
    1,594,159
    
    
    $
    18,785
    
    
    $
    (39,843
    )
    
    $
    1,573,101
  76




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##### Table of Contents



Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedAt December 31, 2009:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    11,268
    
    
    $
    26
    
    
    $
    1,260
    
    
    $
    14
    
    
    $
    12,528
    
    
    $
    40U.S. government agencies and government sponsored enterprises
    
    
    261,543
    
    
    
    1,164
    
    
    
    
    
    
    
    
    
    
    
    261,543
    
    
    
    1,164Corporate
    
    
    70
    
    
    
    2
    
    
    
    410
    
    
    
    1,220
    
    
    
    480
    
    
    
    1,222Total debt securities
    
    
    272,881
    
    
    
    1,192
    
    
    
    1,670
    
    
    
    1,234
    
    
    
    274,551
    
    
    
    2,426Residential mortgage-backed securities:Government National Mortgage Association
    
    
    19,987
    
    
    
    86
    
    
    
    8,269
    
    
    
    157
    
    
    
    28,256
    
    
    
    243Federal National Mortgage Association
    
    
    116
    
    
    
    1
    
    
    
    551
    
    
    
    9
    
    
    
    667
    
    
    
    10Federal Home Loan Mortgage Corporation
    
    
    87
    
    
    
    1
    
    
    
    412
    
    
    
    9
    
    
    
    499
    
    
    
    10Collateralized mortgage obligations:Government National Mortgage Association
    
    
    875,059
    
    
    
    15,896
    
    
    
    
    
    
    
    
    
    
    
    875,059
    
    
    
    15,896Federal National Mortgage Association
    
    
    47,705
    
    
    
    1,647
    
    
    
    
    
    
    
    
    
    
    
    47,705
    
    
    
    1,647Federal Home Loan Mortgage Corporation
    
    
    69,198
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    69,198
    
    
    
    753Non-agency issued
    
    
    46,294
    
    
    
    772
    
    
    
    73,607
    
    
    
    6,373
    
    
    
    119,901
    
    
    
    7,145Total collateralized mortgage obligations
    
    
    1,038,256
    
    
    
    19,068
    
    
    
    73,607
    
    
    
    6,373
    
    
    
    1,111,863
    
    
    
    25,441Total mortgage-backed securities
    
    
    1,058,446
    
    
    
    19,156
    
    
    
    82,839
    
    
    
    6,548
    
    
    
    1,141,285
    
    
    
    25,704Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    3,067
    
    
    
    98
    
    
    
    3,067
    
    
    
    98Total securities available for sale in an unrealized loss
position
    
    $
    1,331,327
    
    
    $
    20,348
    
    
    $
    87,576
    
    
    $
    7,880
    
    
    $
    1,418,903
    
    
    $
    28,228Investment securities held to maturity:Residential mortgage-backed securities:Collateralized mortgage obligations:Government National Mortgage Association
    
    $
    51,389
    
    
    $
    455
    
    
    $
    
    
    
    $
    
    
    
    $
    51,389
    
    
    $
    455Federal National Mortgage Association
    
    
    38,216
    
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    38,216
    
    
    
    107Total securities held to maturity in an unrealized loss
position
    
    $
    89,605
    
    
    $
    562
    
    
    $
    
    
    
    $
    
    
    
    $
    89,605
    
    
    $
    562
  77




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##### Table of Contents



Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedAt December 31, 2008:
    
    value
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesInvestment securities available for sale:Debt securities:States and political subdivisions
    
    $
    6,116
    
    
    $
    48
    
    
    $
    379
    
    
    $
    4
    
    
    $
    6,495
    
    
    $
    52U.S. government agencies and government sponsored enterprises
    
    
    1,971
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    1,971
    
    
    
    20Corporate
    
    
    1,689
    
    
    
    1,589
    
    
    
    
    
    
    
    
    
    
    
    1,689
    
    
    
    1,589Total debt securities
    
    
    9,776
    
    
    
    1,657
    
    
    
    379
    
    
    
    4
    
    
    
    10,155
    
    
    
    1,661Residential mortgage-backed securities:Government National Mortgage Association
    
    
    9,550
    
    
    
    395
    
    
    
    121
    
    
    
    4
    
    
    
    9,671
    
    
    
    399Federal National Mortgage Association
    
    
    31,438
    
    
    
    258
    
    
    
    2,282
    
    
    
    42
    
    
    
    33,720
    
    
    
    300Federal Home Loan Mortgage Corporation
    
    
    111
    
    
    
    1
    
    
    
    976
    
    
    
    11
    
    
    
    1,087
    
    
    
    12Collateralized mortgage obligations:Government National Mortgage Association
    
    
    13,193
    
    
    
    404
    
    
    
    
    
    
    
    
    
    
    
    13,193
    
    
    
    404Federal National Mortgage Association
    
    
    44,695
    
    
    
    1,192
    
    
    
    702
    
    
    
    2
    
    
    
    45,397
    
    
    
    1,194Federal Home Loan Mortgage Corporation
    
    
    23,318
    
    
    
    29
    
    
    
    3,863
    
    
    
    40
    
    
    
    27,181
    
    
    
    69Non-agency issued
    
    
    201,193
    
    
    
    33,433
    
    
    
    24,954
    
    
    
    1,090
    
    
    
    226,147
    
    
    
    34,523Total collateralized mortgage obligations
    
    
    282,399
    
    
    
    35,058
    
    
    
    29,519
    
    
    
    1,132
    
    
    
    311,918
    
    
    
    36,190Total mortgage-backed securities
    
    
    323,498
    
    
    
    35,712
    
    
    
    32,898
    
    
    
    1,189
    
    
    
    356,396
    
    
    
    36,901Asset-backed securities
    
    
    3,149
    
    
    
    79
    
    
    
    228
    
    
    
    43
    
    
    
    3,377
    
    
    
    122Other
    
    
    351
    
    
    
    3
    
    
    
    3,297
    
    
    
    1,156
    
    
    
    3,648
    
    
    
    1,159Total securities available for sale in an unrealized loss
position
    
    $
    336,774
    
    
    $
    37,451
    
    
    $
    36,802
    
    
    $
    2,392
    
    
    $
    373,576
    
    
    $
    39,843
 Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations
   Non-Agency Collateralized Mortgage Obligations
   78




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##### Table of Contents



Municipal, Corporate Debt and Other Securities
    2009
    
    
    2008
    
    
    2007Gross realized gains
    
    $
    7,458
    
    
    $
    
    
    
    $
    215Gross realized losses
    
    
    (6,247
    )
    
    
    
    
    
    
    (5,610
    )Net realized gains (losses)
    
    $
    1,211
    
    
    $
    
    
    
    $
    (5,395
    )
  79




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##### Table of Contents



Amortized
    
    
    Faircost
    
    
    valueDebt securities:Within one year
    
    $
    280,538
    
    
    $
    282,579After one year through five years
    
    
    446,875
    
    
    
    449,396After five years through ten years
    
    
    29,770
    
    
    
    30,210After ten years
    
    
    3,865
    
    
    
    2,704Total debt securities
    
    
    761,048
    
    
    
    764,889Asset-backed securities
    
    
    3,165
    
    
    
    3,067Mortgage-backed securities
    
    
    4,718,887
    
    
    
    4,756,708Other
    
    
    3,651
    
    
    
    3,664$
    5,486,751
    
    
    $
    5,528,328
   Note 4. Loans and Leases
  2009
    
    
    2008Commercial:Real estate
    
    $
    2,713,542
    
    
    $
    2,211,402Construction
    
    
    348,040
    
    
    
    340,564Business
    
    
    1,481,845
    
    
    
    940,304Specialized lending
    
    
    207,749
    
    
    
    178,916Total commercial
    
    
    4,751,176
    
    
    
    3,671,186Residential real estate
    
    
    1,674,961
    
    
    
    1,990,784Home equity
    
    
    691,069
    
    
    
    624,495Other consumer
    
    
    186,341
    
    
    
    143,989Total loans and leases
    
    
    7,303,547
    
    
    
    6,430,454Net deferred costs and unearned discounts
    
    
    25,909
    
    
    
    33,321Allowance for credit losses
    
    
    (88,303
    )
    
    
    (77,793
    )Total loans and leases, net
    
    $
    7,241,153
    
    
    $
    6,385,982
  80




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Nonaccrual loans
    
    $
    68,561
    
    
    $
    46,417
    
    
    $
    28,054Interest income that would have been recorded if loans had
been performing in accordance with original terms
    
    
    947
    
    
    
    847
    
    
    
    654Balance of impaired loans
    
    
    54,944
    
    
    
    42,512
    
    
    
    22,092Allowance relating to impaired loans included in allowance
for credit losses
    
    
    9,170
    
    
    
    3,768
    
    
    
    4,399Aggregate recorded investment of impaired loans with terms
modified through a troubled debt restructuring
    
    
    29,307
    
    
    
    6,856
    
    
    
    6,052
   2009
    
    
    2008
    
    
    2007Loans classified as held for sale included in residential mortgage loans
    
    $
    32,270
    
    
    $
    1,698
    
    
    $
    3,278Loans sold during the year
    
    
    443,877
    
    
    
    101,652
    
    
    
    91,216Gains on sale of loans, net
    
    
    4,197
    
    
    
    735
    
    
    
    716Mortgages serviced for others
    
    
    823,889
    
    
    
    568,767
    
    
    
    553,631Mortgage servicing asset recorded for loans serviced for others
    
    
    6,596
    
    
    
    4,295
    
    
    
    4,312
   2009
    
    
    2008
    
    
    2007Balance at beginning of year
    
    $
    77,793
    
    
    $
    70,247
    
    
    $
    71,913Acquired at acquisition date
    
    
    
    
    
    
    2,890
    
    
    
    Provision for credit losses
    
    
    43,650
    
    
    
    22,500
    
    
    
    8,500Charge-offs
    
    
    (35,146
    )
    
    
    (20,122
    )
    
    
    (11,901
    )Recoveries
    
    
    2,006
    
    
    
    2,278
    
    
    
    1,817Loans sold
    
    
    
    
    
    
    
    
    
    
    (82
    )Balance at end of year
    
    $
    88,303
    
    
    $
    77,793
    
    
    $
    70,247
 Note 5. Premises and Equipment
  2009
    
    
    2008Land
    
    $
    16,787
    
    
    $
    10,869Buildings and leasehold improvements(1)
    
    
    115,046
    
    
    
    81,809Furniture and equipment
    
    
    98,160
    
    
    
    65,622229,993
    
    
    
    158,300Accumulated depreciation
    
    
    (73,780
    )
    
    
    (62,322
    )Premises and equipment, net
    
    $
    156,213
    
    
    $
    95,978
 (1)
    
    Included in buildings and leasehold improvements are assets for
properties classified as held-for-sale, which had a carrying value of $3.2 million and
$3.6 million at December 31, 2009 and December 31, 2008, respectively.   81




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##### Table of Contents



Note 6. Goodwill and Other Intangible Assets
  Financial
    
    
    ConsolidatedBanking
    
    
    services
    
    
    totalBalances at January 1, 2008
    
    $
    659,080
    
    
    $
    47,844
    
    
    $
    706,924Great Lakes Bancorp, Inc. acquisition
    
    
    41,769
    
    
    
    
    
    
    
    41,769Contingent earn-out
    
    
    
    
    
    
    352
    
    
    
    352Unrecognized tax benefit adjustment
    
    
    (74
    )
    
    
    
    
    
    
    (74
    )Balances at December 31, 2008
    
    
    700,775
    
    
    
    48,196
    
    
    
    748,971NatCity branch acquisition
    
    
    130,079
    
    
    
    
    
    
    
    130,079Contingent earn-out
    
    
    
    
    
    
    57
    
    
    
    57Reclassification adjustment
    
    
    2,050
    
    
    
    (2,050
    )
    
    
    Balances at December 31, 2009
    
    $
    832,904
    
    
    $
    46,203
    
    
    $
    879,107
   2009
    
    
    2008Customer lists
    
    $
    34,240
    
    
    $
    33,923Accumulated amortization
    
    
    (24,275
    )
    
    
    (21,190
    )Net carrying amount
    
    
    9,965
    
    
    
    12,733Core deposit intangible
    
    
    84,340
    
    
    
    54,540Accumulated amortization
    
    
    (38,028
    )
    
    
    (31,695
    )Net carrying amount
    
    
    46,312
    
    
    
    22,845Total amortizing intangible assets, net
    
    $
    56,277
    
    
    $
    35,578
  Note 7. Mortgage Servicing Rights
  2009
    
    
    2008Balance at beginning of year
    
    $
    4,295
    
    
    $
    4,312Addition of mortgage servicing rights
    
    
    4,202
    
    
    
    566Amortization
    
    
    (1,368
    )
    
    
    (583
    )Balance at end of year
    
    
    7,129
    
    
    
    4,295Valuation allowance
    
    
    (533
    )
    
    
    Mortgage servicing rights, net
    
    $
    6,596
    
    
    $
    4,295
  82




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##### Table of Contents



Note 8. Other Assets
  2009
    
    
    2008FHLB stock
    
    $
    79,014
    
    
    $
    62,301Net deferred tax assets (see Note 15)
    
    
    72,985
    
    
    
    97,591Accrued interest receivable
    
    
    50,455
    
    
    
    33,255Receivable from Harleysville National Corporation
    
    
    50,000
    
    
    
    Prepaid Federal Deposit Insurance Corporation premiums
    
    
    38,498
    
    
    
    229Real estate and other investments
    
    
    23,918
    
    
    
    18,675Other receivables and prepaid assets
    
    
    23,723
    
    
    
    17,210Other
    
    
    29,578
    
    
    
    20,799Total other assets
    
    $
    368,171
    
    
    $
    250,060
    83




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##### Table of Contents



Note 9. Deposits
  2009
    
    
    2008Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageBalance
    
    
    rate
    
    
    Balance
    
    
    rateCore deposits:Savings
    
    $
    916,854
    
    
    
    0.14
    %
    
    $
    788,767
    
    
    
    0.24
    %Interest-bearing checking
    
    
    1,063,065
    
    
    
    0.13
    
    
    
    485,220
    
    
    
    0.17Money market deposit accounts
    
    
    3,535,736
    
    
    
    0.72
    
    
    
    1,940,136
    
    
    
    1.47Noninterest-bearing
    
    
    1,256,537
    
    
    
    
    
    
    
    718,593
    
    
    
    Total core deposits
    
    
    6,772,192
    
    
    
    0.41
    
    
    
    3,932,716
    
    
    
    0.79Certificates
    
    
    2,957,332
    
    
    
    1.52
    
    
    
    2,010,897
    
    
    
    2.79Total deposits
    
    $
    9,729,524
    
    
    
    0.75
    %
    
    $
    5,943,613
    
    
    
    1.47
    %
  2009
    
    
    2008
    
    
    2007Certificates
    
    $
    42,924
    
    
    $
    71,534
    
    
    $
    101,161Money market deposit accounts
    
    
    27,700
    
    
    
    43,573
    
    
    
    52,249Savings
    
    
    1,931
    
    
    
    2,198
    
    
    
    3,918Interest-bearing checking
    
    
    996
    
    
    
    1,378
    
    
    
    2,043$
    73,551
    
    
    $
    118,683
    
    
    $
    159,371
   Note 10. Borrowings
  2009
    
    
    2008Short-term borrowings:FHLB advances
    
    $
    308,612
    
    
    $
    443,454Repurchase agreements
    
    
    1,316,149
    
    
    
    214,010Commercial bank line of credit
    
    
    50,000
    
    
    
    60,000Total short-term borrowings
    
    
    1,674,761
    
    
    
    717,464Long-term borrowings:FHLB advances
    
    
    323,091
    
    
    
    562,013Repurchase agreements
    
    
    142,056
    
    
    
    248,408Senior notes
    
    
    150,000
    
    
    
    Subordinated debentures
    
    
    12,372
    
    
    
    12,342Total long-term borrowings
    
    
    627,519
    
    
    
    822,763Total borrowings
    
    $
    2,302,280
    
    
    $
    1,540,227
   84




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##### Table of Contents



2009
    
    
    2008
    
    
    2007FHLB advances
    
    $
    31,359
    
    
    $
    37,715
    
    
    $
    22,047Senior notes
    
    
    5,658
    
    
    
    
    
    
    
    Repurchase agreements
    
    
    12,819
    
    
    
    13,486
    
    
    
    16,761Other
    
    
    2,971
    
    
    
    2,677
    
    
    
    415$
    52,807
    
    
    $
    53,878
    
    
    $
    39,223
      2011
    
    $
    202,4532012
    
    
    168,1302013
    
    
    64,4062014
    
    
    162,403Thereafter
    
    
    30,127$
    627,519
   85




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##### Table of Contents



Note 11. Derivative Financial Instruments
     Asset Derivatives
    
    
    Liability DerivativesStatement of condition
    
    Notional
    
    
    
    
    
    
    Statement of condition
    
    Notionalcategory
    
    amount
    
    
    Fair value
    
    
    category
    
    amount
    
    
    Fair valueDerivatives designated as hedging instruments:Interest rate swap agreements
    
    Other assets
    
    $
    
    
    
    $
    
    
    
    Other liabilities
    
    $
    57,687
    
    
    $
    2,218Derivatives not designated as hedging instruments:Interest rate swap agreements
    
    Other assets
    
    
    206,247
    
    
    
    9,629
    
    
    Other liabilities
    
    
    206,247
    
    
    
    9,831Total derivatives
    
    
    
    $
    206,247
    
    
    $
    9,629
    
    
    
    
    $
    263,934
    
    
    $
    12,049
  Amount ofIncome statement category
    
    (Loss) gainDerivatives in fair value hedging relationships:Interest rate swap agreements
    
    
    
    Other Noninterest Income
    
    $
    (307
    )Derivatives not designated as hedging instruments:Interest rate swap agreements
    
    
    

    Other Noninterest Income
    
    
    182Total
    
    
    
    
    
    $
    (125
    )
  86




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##### Table of Contents



Amount of lossAmount of gain
    
    
    
    
    
    reclassified fromrecognized in other
    
    
    Location of loss reclassified from
    
    
    accumulated othercomprehensive income,
    
    
    accumulated other comprehensive
    
    
    comprehensivenet of tax
    
    
    income into income
    
    
    income into incomeDerivatives in cash flow hedging relationships:Interest rate swap agreements
    
    $206
    
    
    Interest expense - borrowings
    
    $(1,301)
 Note 12. Commitments and Contingent Liabilities
 Loan Commitments
   2009
    
    
    2008Outstanding commitments to originate loans:Fixed rate
    
    $
    100,325
    
    
    $
    94,330Variable rate
    
    
    157,413
    
    
    
    129,634Total commitments outstanding
    
    $
    257,738
    
    
    $
    223,964Unused lines of credit
    
    $
    1,900,686
    
    
    $
    978,973Standby letters of credit
    
    
    142,900
    
    
    
    98,120Commitments to sell residential mortgages
    
    
    84,106
    
    
    
    30,896
  Lease Obligations
    87




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##### Table of Contents



Contingent Liabilities
  Note 13. Preferred stock and Warrant
 Preferred Stock and Warrant
    Note 14. Capital
 Bank Capital
    88




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##### Table of Contents



To be well-capitalizedMinimum
    
    
    under prompt correctiveActual
    
    
    
    
    
    
    capital adequacy
    
    
    action provisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioFirst Niagara Bank:December 31, 2009:Tangible capital
    
    $
    1,009,885
    
    
    
    7.48
    %
    
    $
    202,386
    
    
    
    1.50
    %
    
    
    N/A
    
    
    
    N/ATier 1 (core) capital
    
    
    1,009,885
    
    
    
    7.48
    
    
    
    539,696
    
    
    
    4.00
    
    
    $
    674,620
    
    
    
    5.00
    %Tier 1 risk-based capital
    
    
    1,009,885
    
    
    
    12.63
    
    
    
    319,893
    
    
    
    4.00
    
    
    
    479,839
    
    
    
    6.00Total risk-based capital
    
    
    1,098,188
    
    
    
    13.73
    
    
    
    639,785
    
    
    
    8.00
    
    
    
    799,732
    
    
    
    10.00December 31, 2008:Tangible capital
    
    $
    717,078
    
    
    
    8.47
    %
    
    $
    127,037
    
    
    
    1.50
    %
    
    
    N/A
    
    
    
    N/ATier 1 (core) capital
    
    
    717,078
    
    
    
    8.47
    
    
    
    338,766
    
    
    
    4.00
    
    
    $
    423,457
    
    
    
    5.00
    %Tier 1 risk-based capital
    
    
    717,078
    
    
    
    11.48
    
    
    
    249,908
    
    
    
    4.00
    
    
    
    374,862
    
    
    
    6.00Total risk-based capital
    
    
    794,872
    
    
    
    12.72
    
    
    
    499,816
    
    
    
    8.00
    
    
    
    624,770
    
    
    
    10.00First Niagara Commercial Bank:December 31, 2009:Leverage Ratio
    
    $
    56,376
    
    
    
    5.25
    %
    
    $
    32,244
    
    
    
    3.00
    %
    
    $
    53,739
    
    
    
    5.00
    %Tier 1 risk-based capital
    
    
    56,376
    
    
    
    27.63
    
    
    
    8,162
    
    
    
    4.00
    
    
    
    12,243
    
    
    
    6.00Total risk-based capital
    
    
    56,376
    
    
    
    27.63
    
    
    
    16,324
    
    
    
    8.00
    
    
    
    20,405
    
    
    
    10.00December 31, 2008:Leverage Ratio
    
    $
    39,988
    
    
    
    6.23
    %
    
    $
    19,256
    
    
    
    3.00
    %
    
    $
    32,094
    
    
    
    5.00
    %Tier 1 risk-based capital
    
    
    39,988
    
    
    
    28.42
    
    
    
    5,629
    
    
    
    4.00
    
    
    
    8,443
    
    
    
    6.00Total risk-based capital
    
    
    39,988
    
    
    
    28.42
    
    
    
    11,257
    
    
    
    8.00
    
    
    
    14,071
    
    
    
    10.00
    Consolidated Capital
   89




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##### Table of Contents



Note 15. Income Taxes
  2009
    
    
    2008
    
    
    2007Income tax expense
    
    $
    40,676
    
    
    $
    44,964
    
    
    $
    40,938Stockholders equity
    
    
    20,966
    
    
    
    (18,312
    )
    
    
    9,246
  2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    30,985
    
    
    $
    37,412
    
    
    $
    41,222State
    
    
    6,144
    
    
    
    4,641
    
    
    
    3,61137,129
    
    
    
    42,053
    
    
    
    44,833Deferred taxes (benefit):Federal
    
    
    4,257
    
    
    
    3,022
    
    
    
    (3,392
    )State
    
    
    (710
    )
    
    
    (111
    )
    
    
    (503
    )3,547
    
    
    
    2,911
    
    
    
    (3,895
    )Total income tax expense
    
    $
    40,676
    
    
    $
    44,964
    
    
    $
    40,938
  2009
    
    
    2008
    
    
    2007Tax expense at statutory rate
    
    $
    42,019
    
    
    
    46,691
    
    
    
    43,758Increase (decrease) attributable to:State income taxes, net of Federal benefit
    
    
    3,274
    
    
    
    2,923
    
    
    
    1,529Bank owned life insurance income
    
    
    (1,838
    )
    
    
    (1,907
    )
    
    
    (1,697
    )Municipal interest
    
    
    (3,937
    )
    
    
    (4,087
    )
    
    
    (3,528
    )Nondeductible ESOP expense
    
    
    219
    
    
    
    531
    
    
    
    436Amortization of nondeductible intangibles
    
    
    186
    
    
    
    186
    
    
    
    186Other
    
    
    753
    
    
    
    627
    
    
    
    254Income taxes
    
    $
    40,676
    
    
    
    44,964
    
    
    
    40,938
  90




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##### Table of Contents



2009
    
    
    2008Deferred tax assets:Net operating loss carryforwards acquired
    
    $
    50,972
    
    
    $
    55,241Financial statement allowance for credit losses
    
    
    34,584
    
    
    
    29,742Premises and equipment
    
    
    5,492
    
    
    
    5,862Stock-based compensation
    
    
    4,501
    
    
    
    3,993Deferred compensation
    
    
    3,939
    
    
    
    4,233Post-retirement benefit obligation
    
    
    3,512
    
    
    
    3,478Tax credit carryforwards acquired
    
    
    3,170
    
    
    
    3,170Pension benefits
    
    
    2,988
    
    
    
    3,190Other accrued expenses not currently deductible
    
    
    2,265
    
    
    
    2,432Unrealized loss on securities available for sale
    
    
    
    
    
    
    8,342SOP 03-3 adjustment
    
    
    509
    
    
    
    755Other
    
    
    3,846
    
    
    
    2,026Total gross deferred tax assets
    
    
    115,778
    
    
    
    122,464Deferred tax liabilities:Unrealized gain on investment securities available for sale
    
    
    (11,288
    )
    
    
    Securitizations
    
    
    (11,201
    )
    
    
    (8,948
    )Acquired intangibles
    
    
    (10,668
    )
    
    
    (11,423
    )Prepaid expenses
    
    
    (3,861
    )
    
    
    Net purchase premium on acquired companies
    
    
    (2,051
    )
    
    
    (1,533
    )Tax return allowance for credit losses, in excess of base year amount
    
    
    (513
    )
    
    
    (1,557
    )Other
    
    
    (3,211
    )
    
    
    (1,412
    )Total gross deferred tax liabilities
    
    
    (42,793
    )
    
    
    (24,873
    )Net deferred tax asset
    
    $
    72,985
    
    
    $
    97,591
      Balance at beginning of year
    
    $
    9,451Additions based on tax positions related to
the current year
    
    
    9Adjustments for tax positions of prior years
    
    
    (491
    )Balance at end of year
    
    $
    8,969
   91




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##### Table of Contents



Note 16. Earnings Per Share
  2009
    
    
    2008 (1)
    
    
    2007 (1)Net income available to common stockholders
    
    $
    67,331
    
    
    $
    87,254
    
    
    $
    84,085Less income allocable to unvested restricted stock awards
    
    
    187
    
    
    
    
    
    
    
    Net income allocable to common stockholders
    
    $
    67,144
    
    
    $
    87,254
    
    
    $
    84,085Weighted average common shares outstanding:Total shares issued
    
    
    156,966
    
    
    
    124,758
    
    
    
    120,045Unallocated ESOP shares
    
    
    (3,007
    )
    
    
    (3,228
    )
    
    
    (3,486
    )Unvested restricted stock awards
    
    
    (423
    )
    
    
    (552
    )
    
    
    (554
    )Treasury shares
    
    
    (6,703
    )
    
    
    (13,447
    )
    
    
    (13,167
    )Total basic weighted average common shares outstanding
    
    
    146,833
    
    
    
    107,531
    
    
    
    102,838Incremental shares from assumed exercise of stock options
    
    
    137
    
    
    
    381
    
    
    
    490Incremental shares from assumed vesting of restricted stock awards
    
    
    235
    
    
    
    262
    
    
    
    144Total diluted weighted average common shares outstanding
    
    
    147,205
    
    
    
    108,174
    
    
    
    103,472Basic earnings per common share
    
    $
    0.46
    
    
    
    0.81
    
    
    
    0.82Diluted earnings per common share
    
    $
    0.46
    
    
    
    0.81
    
    
    
    0.81Anti-dilutive warrants, stock options, and restricted stock awards excluded
from the diluted weighted average common share calculations
    
    
    2,308
    
    
    
    751
    
    
    
    897
 (1)
 Note 17. Stock-Based Compensation
  Stock Option Plans
   92




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##### Table of Contents



Restricted Stock Plan
  Long-Term Performance Plan
     Stock Option Grants
  Number of
    
    
    Weighted averageshares
    
    
    exercise priceOutstanding at January 1, 2009
    
    
    2,845
    
    
    $
    12.41Granted
    
    
    364
    
    
    
    12.91Exercised
    
    
    (70
    )
    
    
    6.17Forfeited
    
    
    (7
    )
    
    
    13.11Outstanding at December 31, 2009
    
    
    3,132
    
    
    $
    12.61
  93




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##### Table of Contents



Weighted
    
    
    Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    average
    
    
    
    
    
    
    averageOptions
    
    
    exercise
    
    
    remaining
    
    
    Options
    
    
    exerciseExercise price
    
    outstanding
    
    
    price
    
    
    life (years)
    
    
    exercisable
    
    
    priceDecember 31, 2009:$3.50 - $12.02
    
    
    798
    
    
    $
    10.00
    
    
    
    5.3
    
    
    
    496
    
    
    $
    8.84$12.17 - $12.91
    
    
    993
    
    
    
    12.85
    
    
    
    5.1
    
    
    
    960
    
    
    
    12.88$12.93 - $14.58
    
    
    785
    
    
    
    13.36
    
    
    
    6.3
    
    
    
    406
    
    
    
    13.61$14.70 - $16.21
    
    
    556
    
    
    
    14.86
    
    
    
    6.4
    
    
    
    453
    
    
    
    14.89Total
    
    
    3,132
    
    
    
    12.61
    
    
    
    5.7
    
    
    
    2,315
    
    
    
    12.54December 31, 2008:$3.50 - $12.02
    
    
    844
    
    
    $
    9.65
    
    
    
    5.8
    
    
    
    427
    
    
    $
    7.39$12.17 - $12.91
    
    
    996
    
    
    
    12.85
    
    
    
    6.1
    
    
    
    813
    
    
    
    12.89$13.28 - $14.70
    
    
    719
    
    
    
    14.02
    
    
    
    6.2
    
    
    
    456
    
    
    
    13.81$14.83 - $16.21
    
    
    286
    
    
    
    15.00
    
    
    
    6.8
    
    
    
    245
    
    
    
    15.03Total
    
    
    2,845
    
    
    
    12.41
    
    
    
    6.1
    
    
    
    1,941
    
    
    
    12.17December 31, 2007:$3.49 - $12.87
    
    
    1,059
    
    
    $
    9.18
    
    
    
    4.3
    
    
    
    965
    
    
    $
    8.83$12.91
    
    
    725
    
    
    
    12.91
    
    
    
    7.2
    
    
    
    402
    
    
    
    12.91$13.28 - $14.70
    
    
    802
    
    
    
    13.97
    
    
    
    7.3
    
    
    
    393
    
    
    
    13.54$14.83 - $16.21
    
    
    305
    
    
    
    14.99
    
    
    
    7.6
    
    
    
    161
    
    
    
    15.09Total
    
    
    2,891
    
    
    
    12.06
    
    
    
    6.2
    
    
    
    1,921
    
    
    
    11.17
 Total
    
    
    Aggregate
    
    
    Weighted averageDecember 31, 2009
    
    shares
    
    
    intrinsic value (1)
    
    
    remaining contractual termOptions outstanding
    
    
    3,132
    
    
    $
    4,656
    
    
    
    5.7Options currently exercisable
    
    
    2,315
    
    
    
    3,682
    
    
    
    4.7
 (1)
    
    Intrinsic value is the difference between the fair value of
our stock at December 31, 2009 and the exercise price of the stock award.   2009
    
    
    2008
    
    
    2007Options granted
    
    
    364
    
    
    
    466
    
    
    
    372Grant date weighted average fair value per share
    
    $
    2.88
    
    
    $
    1.83
    
    
    $
    3.31Grant date weighted average share price
    
    $
    12.91
    
    
    $
    11.98
    
    
    $
    14.50Dividend yield
    
    
    4.34
    %
    
    
    4.68
    %
    
    
    3.59
    %Risk-free interest rate
    
    
    1.98
    %
    
    
    3.13
    %
    
    
    4.71
    %Expected volatility factor
    
    
    35.61
    %
    
    
    24.72
    %
    
    
    26.68
    %Expected life (in years)
    
    
    5.7
    
    
    
    5.7
    
    
    
    6.2
  Restricted Stock Awards
   94




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##### Table of Contents



Weighted averageNumber of
    
    
    grant date fairshares
    
    
    valueUnvested at January 1, 2009
    
    
    496
    
    
    $
    14.13Awarded
    
    
    153
    
    
    
    12.75Vested
    
    
    (234
    )
    
    
    14.35Forfeited
    
    
    (3
    )
    
    
    13.42Unvested at December 31, 2009
    
    
    412
    
    
    $
    13.50
  Restricted Stock Units
  Note 18. Benefit Plans
   Pension Plans
    95




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##### Table of Contents



2009
    
    
    2008Change in projected benefit obligation:Projected benefit obligation at beginning of year
    
    $
    70,455
    
    
    $
    64,114Service cost
    
    
    193
    
    
    
    Interest cost
    
    
    4,113
    
    
    
    4,869Actuarial loss
    
    
    3,569
    
    
    
    6,266Benefits paid
    
    
    (4,108
    )
    
    
    (4,794
    )Projected benefit obligation at end of year
    
    
    74,222
    
    
    
    70,455Change in fair value of plan assets:Fair value of plan assets at beginning of year
    
    
    60,889
    
    
    
    76,499Employer contributions
    
    
    155
    
    
    
    155Actual return on plan assets
    
    
    8,209
    
    
    
    (11,009
    )Benefits paid
    
    
    (4,022
    )
    
    
    (4,756
    )Fair value of plan assets at end of year
    
    
    65,231
    
    
    
    60,889Underfunded status at year end
    
    $
    (8,991
    )
    
    $
    (9,566
    )
  2009
    
    
    2008
    
    
    2007Service cost
    
    $
    193
    
    
    $
    
    
    
    $
    Interest cost
    
    
    4,113
    
    
    
    3,895
    
    
    
    3,818Expected return on plan assets
    
    
    (2,953
    )
    
    
    (3,739
    )
    
    
    (4,971
    )Amortization of unrecognized loss
    
    
    1,272
    
    
    
    12
    
    
    
    161Amortization of unrecognized prior service liability
    
    
    16
    
    
    
    16
    
    
    
    16Settlement charge
    
    
    
    
    
    
    
    
    
    
    84Net periodic pension cost
    
    $
    2,641
    
    
    $
    184
    
    
    $
    (892
    )
  2009
    
    
    2008Net (gain) loss
    
    $
    (3,045
    )
    
    $
    21,930Amortization of prior service cost
    
    
    (16
    )
    
    
    (16
    )Total (gain) loss recognized in other comprehensive income
    
    $
    (3,061
    )
    
    $
    21,914Total recognized in net periodic pension cost and other
comprehensive income
    
    $
    (420
    )
    
    $
    22,098
  2009
    
    
    2008
    
    
    2007Projected benefit obligation:Discount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    6.25
    %Net periodic pension cost:Discount rate
    
    
    6.00
    %
    
    
    6.25
    %
    
    
    5.75
    %Expected long-term rate of return on plan assets
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    7.00
    %
   96




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##### Table of Contents



Fair Value Measurements at  December 31, 2009
 Asset Category
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Cash
    
    $
    3,746
    
    
    $
    3,746
    
    
    $
    
    
    
    $
    Equity securities:First Niagara Financial Group common stock
    
    
    342
    
    
    
    342
    
    
    
    
    
    
    
    Large cap growth
    
    
    7,302
    
    
    
    7,302
    
    
    
    
    
    
    
    Large cap value
    
    
    3,923
    
    
    
    3,923
    
    
    
    
    
    
    
    Other
    
    
    2,299
    
    
    
    2,299
    
    
    
    
    
    
    
    Fixed income securities:U.S. Treasuries
    
    
    183
    
    
    
    
    
    
    
    183
    
    
    
    Government bonds
    
    
    201
    
    
    
    
    
    
    
    201
    
    
    
    Government agency bonds
    
    
    1,949
    
    
    
    1,949
    
    
    
    
    
    
    
    Corporate bonds
    
    
    484
    
    
    
    
    
    
    
    484
    
    
    
    Mortgage-backed securities
    
    
    1,948
    
    
    
    1,948
    
    
    
    
    
    
    
    Total return mutual fund
    
    
    23,481
    
    
    
    23,481
    
    
    
    
    
    
    
    Intermediate term bond fund
    
    
    19,373
    
    
    
    19,373
    
    
    
    
    
    
    
    $
    65,231
    
    
    $
    64,363
    
    
    $
    868
    
    
    $
    
    2010
    
    $
    4,2812011
    
    
    4,1522012
    
    
    4,3272013
    
    
    4,5252014
    
    
    4,3752015-2019
    
    
    23,512
  97




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##### Table of Contents



Other Post-retirement Benefits
  2009
    
    
    2008Change in accumulated post-retirement benefit obligation:Accumulated post-retirement benefit obligation at beginning of year
    
    $
    8,778
    
    
    $
    9,392Interest cost
    
    
    506
    
    
    
    631Actuarial loss (gain)
    
    
    18
    
    
    
    (731
    )Benefits paid
    
    
    (439
    )
    
    
    (514
    )Accumulated post-retirement benefit obligation at end of year
    
    $
    8,863
    
    
    $
    8,778Unfunded status at year end
    
    $
    (8,863
    )
    
    $
    (8,778
    )
  2009
    
    
    2008
    
    
    2007Interest cost
    
    $
    506
    
    
    $
    631
    
    
    $
    462Amortization of unrecognized loss
    
    
    30
    
    
    
    112
    
    
    
    15Amortization of unrecognized prior service cost
    
    
    (64
    )
    
    
    (81
    )
    
    
    (64
    )Total periodic post-retirement cost
    
    $
    472
    
    
    $
    662
    
    
    $
    413
  2009
    
    
    2008Net loss (gain)
    
    $
    18
    
    
    $
    (842
    )Amortization of unrecognized loss
    
    
    (30
    )
    
    
    Amortization of prior service cost
    
    
    64
    
    
    
    81Total loss (gain) recognized in other comprehensive income
    
    
    52
    
    
    
    (761
    )Total recognized in net periodic post-retirement cost and
other comprehensive income
    
    $
    524
    
    
    $
    (99
    )
  2009
    
    
    2008
    
    
    2007Accumulated post-retirement benefit obligation:Discount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    6.25
    %Total periodic cost:Discount rate
    
    
    6.00
    %
    
    
    6.25
    %
    
    
    5.75
    %
   98




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##### Table of Contents



2010
    
    $
    8362011
    
    
    8192013
    
    
    7752014
    
    
    7382015
    
    
    7162015-2019
    
    
    3,416
  2009
    
    
    2008Other liabilities:Projected benefit obligation in excess of fair value of pension plan
    
    $
    8,991
    
    
    $
    9,566Accumulated post-retirement benefit obligation
    
    
    8,863
    
    
    
    8,778$
    17,854
    
    
    $
    18,344Accumulated other comprehensive loss, net of taxes:Pension plans
    
    $
    13,022
    
    
    $
    14,870Post-retirement benefit plan
    
    
    516
    
    
    
    484$
    13,538
    
    
    $
    15,354
 4 01(k) Plan
  Employee Stock Ownership Plan (ESOP)
  Other Plans
   99




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##### Table of Contents



Note 19. Fair Value of Financial Instruments
  Level 1 Inputs
 Level 2 Inputs
 Level 3 Inputs
   Assets and Liabilities Measured at Fair Value on a Recurring Basis
 Securities Available for Sale
   Interest Rate Swaps
    100




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##### Table of Contents



Fair Value MeasurementsTotal
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3At December 31, 2009Assets:Investment securities available for sale
    
    $
    4,421,678
    
    
    $
    
    
    
    $
    4,421,198
    
    
    $
    480Interest rate swaps
    
    
    9,629
    
    
    
    
    
    
    
    9,629
    
    
    
    Total assets
    
    $
    4,431,307
    
    
    $
    
    
    
    $
    4,430,827
    
    
    $
    480Liabilities:Interest rate swaps
    
    $
    12,049
    
    
    $
    
    
    
    $
    12,049
    
    
    $
    At December 31, 2008Assets:Investment securities available for sale
    
    $
    1,573,101
    
    
    $
    
    
    
    
    1,572,537
    
    
    $
    564Interest rate swaps
    
    
    7,509
    
    
    
    
    
    
    
    7,509
    
    
    
    Total assets
    
    $
    1,580,610
    
    
    $
    
    
    
    $
    1,580,046
    
    
    $
    564Liabilities:Interest rate swaps
    
    $
    9,965
    
    
    $
    
    
    
    $
    9,965
    
    
    $
    
  Investment SecuritiesAvailable for SaleBalance at January 1, 2008
    
    $
    Total losses:Included in earnings
    
    
    (700
    )Included in other comprehensive income
    
    
    (36
    )Purchases, issuances, and settlements, net
    
    
    Transfers in and/or out of Level 3
    
    
    1,300Balance at December 31, 2008
    
    $
    564The amount of total gains or losses for the period included
in earnings attributable to the change in unrealized gains or
losses relating to assets still held at the reporting date
    
    $
    (700
    )
 Investment SecuritiesAvailable for SaleBalance at December 31, 2008
    
    $
    564Total gains (losses):Included in earnings
    
    
    (162
    )Included in other comprehensive income
    
    
    78Purchases, issuances, and settlements, net
    
    
    Transfers in and/or out of Level 3
    
    
    Balance at December 31, 2009
    
    $
    480The amount of total gains or losses for the period included
in earnings attributable to the change in unrealized gains or
losses relating to assets still held at the reporting date
    
    $
    (162
    )
  101




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##### Table of Contents



Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
 Impaired Loans
  Mortgage Servicing Rights
  Real Estate Owned
   December 31, 2009
    
    
    December 31, 2008Estimated fair
    
    
    
    
    
    
    Estimated fairCarrying value
    
    
    value
    
    
    Carrying value
    
    
    valueFinancial assets:Cash and cash equivalents
    
    $
    236,268
    
    
    $
    236,268
    
    
    $
    114,551
    
    
    $
    114,551Investment securities available for sale
    
    
    4,421,678
    
    
    
    4,421,678
    
    
    
    1,573,101
    
    
    
    1,573,101Investment securities held to maturity
    
    
    1,093,552
    
    
    
    1,106,650
    
    
    
    
    
    
    
    Loans and leases, net(1)
    
    
    7,241,153
    
    
    
    7,444,034
    
    
    
    6,385,982
    
    
    
    6,612,111FHLB stock
    
    
    79,014
    
    
    
    79,014
    
    
    
    62,301
    
    
    
    62,301Accrued interest receivable
    
    
    50,455
    
    
    
    50,455
    
    
    
    33,255
    
    
    
    33,255Financial liabilities:Deposits
    
    $
    9,729,524
    
    
    $
    9,763,604
    
    
    $
    5,943,613
    
    
    $
    5,953,692Borrowings
    
    
    2,302,280
    
    
    
    2,309,330
    
    
    
    1,540,227
    
    
    
    1,589,659Accrued interest payable
    
    
    5,498
    
    
    
    5,498
    
    
    
    6,548
    
    
    
    6,548
 (1)
    
    Included in loans and leases, net are residential mortgage loans held for sale with a
carrying value of $32.3 million and a fair value of $35.8 million at December 31, 2009.   102




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##### Table of Contents



Cash and Cash Equivalents
  Loans and Leases
  Investment Securities
  FHLB Stock
  Accrued Interest Receivable
  Deposits
  Borrowings
  Accrued Interest Payable
  Commitments
   103




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##### Table of Contents



Note 20. Segment Information
   Financial
    
    
    ConsolidatedBanking
    
    
    services
    
    
    total2009:Net interest income
    
    $
    364,400
    
    
    $
    
    
    
    $
    364,400Provision for credit losses
    
    
    43,650
    
    
    
    
    
    
    
    43,650Net interest income after provision for credit losses
    
    
    320,750
    
    
    
    
    
    
    
    320,750Noninterest income
    
    
    76,882
    
    
    
    49,093
    
    
    
    125,975Amortization of core deposit and other intangibles
    
    
    6,347
    
    
    
    3,071
    
    
    
    9,418Other noninterest expense
    
    
    276,268
    
    
    
    40,986
    
    
    
    317,254Income before income taxes
    
    
    115,017
    
    
    
    5,036
    
    
    
    120,053Income tax expense
    
    
    38,661
    
    
    
    2,015
    
    
    
    40,676Net income
    
    $
    76,356
    
    
    $
    3,021
    
    
    $
    79,3772008:Net interest income
    
    $
    268,576
    
    
    $
    1
    
    
    $
    268,577Provision for credit losses
    
    
    22,500
    
    
    
    
    
    
    
    22,500Net interest income after provision for credit losses
    
    
    246,076
    
    
    
    1
    
    
    
    246,077Noninterest income
    
    
    65,861
    
    
    
    49,874
    
    
    
    115,735Amortization of core deposit and other intangibles
    
    
    5,126
    
    
    
    3,698
    
    
    
    8,824Other noninterest expense
    
    
    179,963
    
    
    
    39,623
    
    
    
    219,586Income before income taxes
    
    
    126,848
    
    
    
    6,554
    
    
    
    133,402Income tax expense
    
    
    42,135
    
    
    
    2,829
    
    
    
    44,964Net income
    
    $
    84,713
    
    
    $
    3,725
    
    
    $
    88,4382007:Net interest income
    
    $
    224,166
    
    
    $
    12
    
    
    $
    224,178Provision for credit losses
    
    
    8,500
    
    
    
    
    
    
    
    8,500Net interest income after provision for credit losses
    
    
    215,666
    
    
    
    12
    
    
    
    215,678Noninterest income
    
    
    80,051
    
    
    
    51,760
    
    
    
    131,811Amortization of core deposit and other intangibles
    
    
    6,262
    
    
    
    4,171
    
    
    
    10,433Other noninterest expense
    
    
    172,979
    
    
    
    39,054
    
    
    
    212,033Income before income taxes
    
    
    116,476
    
    
    
    8,547
    
    
    
    125,023Income tax expense
    
    
    37,632
    
    
    
    3,306
    
    
    
    40,938Net income
    
    $
    78,844
    
    
    $
    5,241
    
    
    $
    84,085
  104




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##### Table of Contents



Note 21. Condensed Parent Company Only Financial Statements
  Condensed Statements of Condition
    
    2009
    
    
    2008Assets:Cash and cash equivalents
    
    $
    485,372
    
    
    $
    212,391Restricted cash
    
    
    4,000
    
    
    
    3,999Investment securities available for sale
    
    
    18,260
    
    
    
    21,380Loan receivable from ESOP
    
    
    25,991
    
    
    
    27,318Investment in subsidiary
    
    
    1,945,407
    
    
    
    1,469,696Receivable from Harleysville National Corporation
    
    
    50,000
    
    
    
    Deferred taxes
    
    
    46,881
    
    
    
    54,562Other assets
    
    
    20,297
    
    
    
    17,121Total assets
    
    $
    2,596,208
    
    
    $
    1,806,467Liabilities and Stockholders Equity:Accounts payable and other liabilities
    
    $
    10,175
    
    
    $
    6,862Borrowings
    
    
    212,372
    
    
    
    72,342Stockholders equity
    
    
    2,373,661
    
    
    
    1,727,263Total liabilities and stockholders equity
    
    $
    2,596,208
    
    
    $
    1,806,467
 Condensed Statements of Income
    
    2009
    
    
    2008
    
    
    2007Interest income
    
    $
    2,294
    
    
    $
    2,469
    
    
    $
    1,591Dividends received from subsidiary
    
    
    
    
    
    
    56,400
    
    
    
    96,000Total interest and dividend income
    
    
    2,294
    
    
    
    58,869
    
    
    
    97,591Interest expense
    
    
    7,327
    
    
    
    2,620
    
    
    
    415Net interest (expense) income
    
    
    (5,033
    )
    
    
    56,249
    
    
    
    97,176Noninterest income
    
    
    755
    
    
    
    107
    
    
    
    384Noninterest expense
    
    
    9,490
    
    
    
    8,558
    
    
    
    9,452(Loss) income before income taxes and undisbursed (overdistributed)
income of subsidiary
    
    
    (13,768
    )
    
    
    47,798
    
    
    
    88,108Income tax benefit
    
    
    (5,055
    )
    
    
    (3,733
    )
    
    
    (3,464
    )(Loss) income before undisbursed (overdistributed) income of subsidiary
    
    
    (8,713
    )
    
    
    51,531
    
    
    
    91,572Undisbursed (overdistributed) income of subsidiary
    
    
    88,090
    
    
    
    36,907
    
    
    
    (7,487
    )Net income
    
    
    79,377
    
    
    
    88,438
    
    
    
    84,085Accrued preferred stock dividend
    
    
    3,731
    
    
    
    1,022
    
    
    
    Accretion of preferred stock discount
    
    
    8,315
    
    
    
    162
    
    
    
    Net income available to common stockholders
    
    $
    67,331
    
    
    $
    87,254
    
    
    $
    84,085
  105




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##### Table of Contents



Condensed Statements of Cash Flows
    
    2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    79,377
    
    
    $
    88,438
    
    
    $
    84,085Adjustments to reconcile net income to net cash
provided by operating activities:(Undisbursed) overdistributed income of subsidiary
    
    
    (88,090
    )
    
    
    (36,907
    )
    
    
    7,487Stock based compensation expense
    
    
    5,186
    
    
    
    5,633
    
    
    
    6,271Deferred income tax expense (benefit)
    
    
    7,115
    
    
    
    5,492
    
    
    
    (1,798
    )(Increase) decrease in other assets
    
    
    (1,405
    )
    
    
    (1,478
    )
    
    
    864Increase (decrease) in other liabilities
    
    
    1,472
    
    
    
    (916
    )
    
    
    (90
    )Net cash provided by operating activities
    
    
    3,655
    
    
    
    60,262
    
    
    
    96,819Cash flows from investing activities:Proceeds from maturities of securities available for sale
    
    
    3,000
    
    
    
    5,000
    
    
    
    Principal payments received on securities available for sale
    
    
    7,686
    
    
    
    5,870
    
    
    
    Purchases of securities available for sale
    
    
    (7,006
    )
    
    
    (12,948
    )
    
    
    Proceeds from sales of securities available for sale
    
    
    623
    
    
    
    
    
    
    
    1,213Advance to Harleysville National Corporation
    
    
    (50,000
    )
    
    
    
    
    
    
    Acquisitions, net of cash and cash equivalents
    
    
    
    
    
    
    (52,262
    )
    
    
    Repayment of ESOP loan receivable
    
    
    1,327
    
    
    
    1,287
    
    
    
    1,215Other, net
    
    
    (633
    )
    
    
    
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (45,003
    )
    
    
    (53,053
    )
    
    
    2,428Cash flows from financing activities:(Repayments of) proceeds from short term borrowings, net
    
    
    (10,000
    )
    
    
    60,000
    
    
    
    Proceeds from long-term borrowings
    
    
    150,000
    
    
    
    
    
    
    
    Capital contributed to subsidiary
    
    
    (353,600
    )
    
    
    (92,006
    )
    
    
    Issuance of common stock in follow-on stock offerings, net
    
    
    802,215
    
    
    
    108,838
    
    
    
    (Repurchase of) issuance of preferred stock, net
    
    
    (184,011
    )
    
    
    175,453
    
    
    
    (Repurchase of) issuance of common stock warrant
    
    
    (2,700
    )
    
    
    8,476
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    (6,795
    )
    
    
    (95,690
    )Proceeds from exercise of stock options
    
    
    332
    
    
    
    3,715
    
    
    
    4,910Dividends paid on preferred stock
    
    
    (4,754
    )
    
    
    
    
    
    
    Dividends paid on common stock
    
    
    (83,152
    )
    
    
    (60,071
    )
    
    
    (55,899
    )Net cash provided by (used in) financing activities
    
    
    314,330
    
    
    
    197,610
    
    
    
    (146,679
    )Net increase (decrease) in cash and cash equivalents
    
    
    272,982
    
    
    
    204,819
    
    
    
    (47,432
    )Cash and cash equivalents at beginning of year
    
    
    216,390
    
    
    
    11,571
    
    
    
    59,003Cash and cash equivalents at end of year
    
    $
    489,372
    
    
    $
    216,390
    
    
    $
    11,571
  106




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Managements Report on Internal Control Over Financial Reporting
 Evaluation of Disclosure Controls and Procedures
 
 ITEM 9B. OTHER INFORMATION
   107




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   Number of securities to be issued
    
    
    
    
    
    
    Number of securitiesEquity compensation plans approved by
    
    upon exercise of outstanding
    
    
    Weighted average
    
    
    remaining available forstockholders
    
    options and rights
    
    
    exercise price
    
    
    issuance under the planFirst Niagara Financial Group, Inc. 1999 Stock Option Plan
    
    
    293,974
    
    
    $
    6.88
    
    
    
    First Niagara Financial Group, Inc. 1999 Recognition and Retention Plan
    
    
    34,859
    (1)
    
    Not Applicable
    
    
    
    First Niagara Financial Group, Inc. Amended and Restated 2002 Long-term Incentive Stock Benefit Plan
    
    
    3,213,499
    
    
    $
    13.20
    
    
    
    3,615,810Total
    
    
    3,542,332
    
    
    
    
    
    
    
    3,615,810
 (1)
    
    Represents shares that have been granted but have not yet vested. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
   108




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    Exhibit Index to Form 10-KExhibit 2.1
    
    Agreement and Plan of Merger by and
between First Niagara Financial Group, Inc. and Harleysville
National Corporation(1)Exhibit 3.1
    
    Certificate of
Incorporation(2)Exhibit 3.2
    
    Certificate of
Incorporation(3)Exhibit 3.3
    
    Amended and Restated
Bylaws(4)Exhibit 4.1
    
    Form of Common Stock Certificate of
First Niagara Financial Group, Inc.(2)Exhibit 4.2
    
    Senior Notes Indenture, and First
Supplemental Indenture to Senior Notes Indenture, each dated as of
September 4, 2009, between First Niagara Financial Group, Inc. and
The Bank of New York Mellon, Trustee(5)Exhibit 10.1
    
    First Niagara Financial Group, Inc. Amended and Restated Change in Control Agreement with John R.
Koelmel(6)Exhibit 10.2
    
    First Niagara Financial Group, Inc. Form of
Amended and Restated Change in Control
Agreement(6)Exhibit 10.3
    
    First Niagara Financial Group, Inc. Amended and Restated CEO
Executive Severance
Plan(6)Exhibit 10.4
    
    First Niagara Financial Group, Inc. Executive Severance Plan
(for executive officers other than Mr.
Koelmel)(6)Exhibit 10.5
    
    First Niagara Financial Group, Inc. 1999
Stock Option
Plan(7)Exhibit 10.6
    
    First Niagara Financial Group, Inc. 1999 Recognition and
Retention Plan(8)Exhibit 10.7
    
    First Niagara Financial Group, Inc. Amended and Restated 2002 Long-Term Incentive Stock Benefit
Plan(7)Exhibit 10.8
    
    Amended and Restated First Niagara Bank and First Niagara Financial Group, Inc. Directors Deferred Fees
Plan(6)Exhibit 10.9
    
    First Niagara Financial Group, Inc. Pinnacle Incentive
Compensation
Plan(6)Exhibit 10.10
    
    First Amended and Restated Revolving Credit Promissory
Note with Fifth Third
Bank(9)Exhibit 10.11
    
    Residential Mortgage Program Agreement with Homestead
Funding Corp.(10)Exhibit 10.12
    
    First Niagara Financial Group, Inc. 2005 Long-Term Performance
Plan(11)Exhibit 11
    
    Calculations of Basic Earnings Per Share and Diluted Earnings Per Share (See Note 16 of Notes to
Consolidated Financial Statements)Exhibit 21
    
    Subsidiary of First Niagara Financial Group, Inc. (See Part I, Item 1 of Form 10-K)Exhibit 23
    
    Consent of Independent Registered Public Accounting FirmExhibit 31.1
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 31.2
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32
    
    Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
 (1)
    
    Incorporated by reference to the Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 27, 2009.(2)
    
    Incorporated by reference to our Registration Statement on Form S-1,
originally filed with the Securities and Exchange Commission on September 18, 2002.(3)
    
    Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
filed with the Securities and Exchange Commission on November 25, 2008.(4)
    
    Incorporated by reference to the Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 30, 2009.(5)
    
    Incorporated by reference to the Current Report on Form 8-K
filed with the Securities and Exchange Commission on
September 9, 2009.(6)
    
    Incorporated by reference to our 2008 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on February 27, 2009.(7)
    
    Incorporated by reference to our 2005 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 15, 2006.(8)
    
    Incorporated by reference to our Proxy Statement for the 1999 Annual Meeting
of Stockholders filed with the Securities and Exchange Commission on March 31, 1999.(9)
    
    Incorporated by reference to the Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 11, 2008.(10)
    
    Incorporated by reference to our 2004 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 15, 2005 and to the Current Report on
8-K filed with the Securities and Exchange Commission on December 12, 2008.(11)
    
    Incorporated by reference to the Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 23, 2005.  109




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##### Table of Contents



SIGNATURES
  FIRST NIAGARA FINANCIAL GROUP, INC.Date: February 26, 2010
    By:
    /s/ John R. KoelmelJohn R. KoelmelPresident and Chief Executive Officer  Signatures
    
    Title
    
    Date/s/ John R. Koelmel

John R. Koelmel
    
    Director, President & CEO
    
    February 26, 2010/s/ Michael W. Harrington

Michael W. Harrington
    
    Chief Financial Officer
    
    February 26, 2010/s/ Thomas E. Baker

Thomas E. Baker
    
    Director
    
    February 26, 2010/s/ G. Thomas Bowers

G. Thomas Bowers
    
    Director, Chairman
    
    February 26, 2010/s/ Carl A. Florio

Carl A. Florio
    
    Director
    
    February 26, 2010/s/ William H. Jones

William H. Jones
    
    Director
    
    February 26, 2010/s/ Daniel W. Judge

Daniel W. Judge
    
    Director
    
    February 26, 2010/s/ George M. Philip

George M. Philip
    
    Director
    
    February 26, 2010/s/ Louise Woerner

Louise Woerner
    
    Director
    
    February 26, 2010/s/ David M. Zebro

David M. Zebro
    
    Director, Vice Chairman
    
    February 26, 2010
  110