First Niagara Financial Group-Flying Under the Radar
Friday, June 17, 2011 10:09 AM

Even if you've heard of First Niagara Financial Group (Ticker: FNFG), there's a good chance that's the extent of it. Though they have been a viable concern for over 140 years, FNFG's size and relative obscurity in the world of banking has kept them under many investors' radar, but it's time for that to change.

First Niagara Financial Group is the holding company of First Niagara Bank, a commercial and retail banking concern with 257 branches in upstate New York and Pennsylvania. With $2.82 billion in assets, FNFG isn't in the same ball park as the Citi's and JP Morgan's of the world as far as assets go, but it offers investors an opportunity the big boys can only dream about.

Rounding out the portfolio of offerings FNFG provides its retail and commercial customers are insurance products, including life, disability and long term care. The bank also has a wealth management division, and employee benefit plan administration and consultative services.

FNFG's 52 percent revenue growth year-over-year is largely due to their recent $1.5 billion acquisition of New Alliance Bancshares in April. Doubling assets under management and inheriting a strong commercial loan portfolio have proven beneficial for the bank and its investors.

With a P/E of nearly 18, First Niagara is hardly cheap. But their solid management team is able to produce operating margins nearly twice the industry average. The stock is currently trading at $13.65, nearly 15 percent off its 52-week high of $15.10. And with growth in SBA lending up 6.3 percent versus the same quarter last year, FNFG is poised to break through the fairly narrow trading range the bank has found itself in for much of 2011.

But the icing on the proverbial cake for investors is First Niagara's dividend. Yes, it is possible to find a bank that provides its shareholders with more than a token dividend (much of that imposed by The Fed of course), and FNFG's is certainly more than a token. With a yield of 4.70 percent in an interest rate environment that offers 0.18 percent on a 52-week T-Bill, this alone is reason enough to investigate FNFG.

A strong balance sheet, solid management and minimal downside risk are all reasons to look at adding a solid mid-cap banking concern to your portfolio. First Niagara Financial Group and that tempting dividend won't keep them under the radar for long.



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