FNFG

First Niagara Financial Group Inc. (FNFG)

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First Niagara Financial Group Inc. (FNFG)

Q3 2010 Earnings Conference Call

October 21, 2010 11 AM ET

Executives

John Koelmel – CEO

Michael Harrington – CFO

Kevin O’Bryan – Chief Credit Officer

Analysts

Damon Delmonte – KBW

Bob Ramsey – FBR Capital Markets

Collyn Gilbert – Stifel Nicolaus

Mathew Kelley – Sterne, Agee

Matthew Kelley – Sterne Agee

David Darst – Guggenheim Partners

Tom Alonso – Macquarie

Bruce Harting – Barclays Capital

Presentation

Operator

Greetings and welcome to the First Niagara Financial Group Inc. Third Quarter 2010 Earnings Release Conference. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, John Koelmel, President and CEO for First Niagara Financial Group. Thank you Mr. Koelmel, you may begin.

John Koelmel

Good morning everyone, appreciate you taking sometime to listen to our story and as always I am joined today by Mike Harrington, our CFO as well as Kevin O’Bryan, our Chief Credit Officer.

Third quarter, it’s been frankly a bit awaited and an important one from our standpoint, not just because we are able to perpetuate the continuing series of solid performances but this really is our first clean quarter in a while and one that we knew would give us all a good baseline for evaluating the business we have with the benefit of the two new Pennsylvania franchises and our ability to operate and drive good profitability. Obviously, very pleased to announce not only strong performance but the bump in the dividend and I will come back and talk about that in a couple of minutes a bit more. To hear from me consistently, it’s more than just the numbers, it’s the ability to continue to deliver predictable very positive growth. We are not out there making that on the back of lower loan loss provisions. We are continuing to take franchise, [inaudible] execute our strategy and frankly also the competition and Mike will take you through the benefits of that in a couple of minutes. But as always, I want to take a little bit of time and offer some of my reflection.

Starting with the core franchise, obviously it continues to perform very, very well and gives us an ongoing foundation for real solid growth. I would believe we aren’t missing a beat anywhere where it really matters, you see the continued growth on the loan side, strong upticks in deposit additions as well as solid performance out of our diversified fee and revenue businesses. Certainly none of that has come at the expense of compromised credit or otherwise risk management.

So I want to make sure we are still shining [inaudible] light on the core business, the legacy business that frankly probably gets overlooked a bit given everything else that we have had going and reaffirm and ensure everyone has good clarity that it’s a business that’s produced consistent double digit commercial loan growth four to five, six quarters now and have already referenced the strong deposit story and as I said, right up front, there is no question we are taking share across of state New York and whether that would be a larger or other more peers or smaller competition.

Capital, guys have long come to know that we are very active and we think very effective in managing capital. It’s a bit of confirming the obvious to say capital is king, has been certainly the key for the industry over the last couple of years and this, you are well aware and as we have talked often. We were proud of the fact that we got a bit of a jumpstart there and read the tealeaves early on and jumped in and we are able to strengthen [ph] a series of equity raises together bolster our capital raise for more than a billion dollars over 18-month period of time and has enabled us to continue to play offense [ph].

Hence we are in a really, really strong position, leverage the capital that’s been raised with the kind of profitable business that we are continuing to run and we are in a really strong position now that the dust has begun to settle in terms of what the right amount necessary amount of capital, how do we more [ph] more opportunistically play with that.

Got to admit, gotten some surprising comments over the last couple of months about in particular with the benefit of the new alliance transaction, whether we are going to have to go back to market and raise capital. It responded very directly then, want to be very [inaudible] now, nothing’s contemplated, and you will hear Mike talk, we referenced last quarter, think $250 million, $300 million of excess. We got at least, if not more today. So there is no follow-on offerings anticipated let alone necessary. In fact our focus is to ensure we effectively manage it and that includes being able to begin to return some of that excess capital to our shareholders.

Have a disappointment today, it’s that I am not able to talk to you about how much stock we bought back where our stock’s been trading, it’s more than attractive buy, but obviously with the transaction, we are locked out of the market and will be for a while. So hence all the more important that we announced the dividend bump and the penny increase, 7% quantitatively. We’ve always been more than sensitive to the returns that our shareholders are able to achieve and when you look at the market in general and where rates are, the kind of dividend return that we are providing our shareholders of where we have been trading, we are talking north of 5%, I can only smile in terms of what that really means for a company with the kind of growth prospects and earnings track record that we have and certainly when you compare a 5% yield to the top 25, 30 banks in the country that talk about an overall yield in basis points rather than 4 or 5 percentage points even in terms of the midcap that’s substantially less than half of that.

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