Three years ago, at the height of the subprime crisis, I wrote rave reviews about First Niagara Financial Group (Nasdaq:FNFG), an upstate New York regional bank. Today, its story is equally impressive, with $30 billion in assets, 346 branches and $18 billion in deposits. More importantly, its stock is ready to takeoff and there are three main reasons for the pending liftoff.
TUTORIAL: The Industry Handbook: The Banking Industry

Growth
Much has changed since I last wrote about First Niagara. It made three acquisitions between September 2009 to the present that have significantly added to its assets and number of branches. First, it acquired 57 NatCity branches from PNC Financial (NYSE:PNC) for a cost of $52.1 million. Then it acquired the parent of Harleysville National Bank and Trust Company in April 2010 and the parent of NewAlliance Bank in April of this year. The two acquisitions cost the company a total of $1.8 billion but brought with it an additional 171 branches in Connecticut, Massachusetts and Pennsylvania as well as $9.1 billion in deposits. The three moves more than doubled the size of the company, were immediately accretive to earnings, and it foreshadows future deals. Management believes a consolidation of small banks over the next two years provides First Niagara with the opportunity to grow its urban presence in the eight cities it already services. For shareholders, that's good news because it's successfully integrated nine deals in the last 10 years. (If a company that you're interested in announces an acquisition, be on the lookout for how it reacts. For more, see Analyzing An Acquisition Announcement.)

Cramer Loves It
On the June 30 edition of Mad Money, Jim Cramer suggested investors interested in a regional bank should buy First Niagara instead of Hudson City Bancorp (Nasdaq:HCBK) because the Buffalo-based holding company is a much stronger business. He's right about that. Compared to regional bank peers BB&T (NYSE:BBT), Comerica (NYSE:CMA), First Horizon National (NYSE:FHN) and others, its key financial metrics are stronger and only getting better.

Stock Price
On the surface, I shouldn't be happy. Since July 23, 2008, when the article first appeared, First Niagara's stock is down 9.9% compared to an increase of 4.2% for the S&P 500. That's a 14.1-percentage point difference. However, when you look at the performance compared to the SPDR KBW Regional Banking ETF (NYSE:KRE), which is a small-cap fund based on the KBW Regional Banking index, you'll see that it wasn't that bad, as the ETF lost almost double the amount over 36 months. Actually, First Niagara's stock has performed rather admirably over the past decade. The seven up years averaged an annual total return of 31.9% while the three down years averaged an annual total return of negative 10.2%. Most impressively, the long-term performance came with very little volatility and now its stock sports a yield upward of 4%. So even when the stock goes sideways you can count on some return. (For related reading, see The Evolution Of Banking.)

The Bottom Line
I've given you three strong reasons to own First Niagara Financial Group. Do your research and you'll see there's much more.

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