Fitch Affirms First Niagara Financial Group's L-T IDR at 'BBB' Following Announcement

NEW YORK--(Business Wire)--
Fitch Ratings has affirmed First Niagara Financial Group, Inc. (FNFG) and its
subsidiaries's ratings. (A full list of rating actions follows at the end of
this release.) The Rating Outlook is Stable.

Fitch's rating action follows FNFG's announcement today of a definitive purchase
agreement with PNC Financial Services Group (PNC) to acquire $4.2 billion in
deposits and 57 branches located in Western Pennsylvania of National City Bank,
a subsidiary of PNC. On the asset-side, FNFG will receive $3.2 billion in cash
and $839 million in gross loans. The deposit premium is 1.3% or approximately
$54 million. The transaction is expected to close in September 2009. The branch
acquisition has received approvals from both company's board of directors and
remains subject to regulatory approval.

The $4.2 billion acquisition is sizeable given that FNFG's total assets stood at
$9.3 billion for year-end 2008 (YE'08). However, FNFG is an experienced acquirer
completing seven transactions since 2000. Additionally, the entrance into
Western Pennsylvania, which includes Pittsburgh, Erie and Warren, should be a
relatively manageable transition given that this market has similar demographics
to FNFG's franchise, which is concentrated in upstate New York. The transaction
would rank FNFG's deposit market share third in Pittsburgh at 8% and fifth in
Erie at 11%. Nonetheless, a key challenge will be developing this new market
that is unfamiliar with the FNFG brand. Additionally, this type of transaction
has sometimes been a challenging market entry vehicle for other financial
institutions.

Importantly, FNFG's due diligence process included a review internally and by
two outside parties of $839 million in gross loans, none of which are 30+ days
delinquent. Management intends to book the loans at fair value at the time of
closing, which results in a $48 million mark or 6% lifetime credit loss. The
loan book consists primarily of commercial & industrial loans.

Given the capital market dislocation, the funding of the deal will be structured
in either a common equity issuance, debt issuance or a combination of the two
for a total of $150 million with PNC financing the transaction. FNFG will have
the option to issue up to $75 million in common equity to PNC or issue holding
company senior unsecured debt up to $150 million less the proceeds from any
common equity issuance with a coupon of 12% and a 5 year maturity, which is
callable at any time at par value by FNFG.

The company has historically managed with high capital levels (tangible common
equity ratio stood at 9% for YE'08). Management viewed this transaction as an
opportunity to leverage some of its capital. That said, Fitch will monitor
acquisition developments as well as integration and capital and earnings
generation post-close as tangible common equity is projected to fall to 5.5%.
FNFG's pro forma capital ratios also include its $150 million capital raise with
$75 million in equity issuance and $75 million in the unsecured debt issuance.
Additionally, FNFG's capital base includes $184 million of preferred stock under
the U.S. Treasury's Capital Purchase Program.

FNFG's rating affirmations and Stable Outlook reflects the bank's consistent
financial performance during a difficult operating environment, FNFG's good
track record in acquiring and integrating banks, and its sound asset quality.
That said, this transaction will significantly lever capital and add an
additional debt burden at the holding company.

Fitch has affirmed First Niagara Financial Group, Inc. and its subsidiaries'
ratings as follows:

First Niagara Financial Group, Inc:

-- Long-term Issuer Default Rating (IDR) at 'BBB'; Stable Outlook;

-- Short-term IDR at 'F2'; Stable Outlook;

-- Preferred Stock Rating at 'BBB-'; Stable Outlook;

-- Individual Rating at 'B/C'; Stable Outlook;

-- Support affirmed at '5';

-- Support Floor at 'NF'.

First Niagara Bank

--Long-term deposits at 'BBB+'; Stable Outlook;

--Long-term IDR at 'BBB'; Stable Outlook;

--Short-term deposits at 'F2'; Stable Outlook;

--Short-term IDR at 'F2'; Stable Outlook;

--Individual rating at 'B/C'; Stable Outlook;

--Support at '5';

--Support Floor at 'NF'.

First Niagara Commercial Bank

--Long-term deposits at 'BBB+'; Stable Outlook;

--Long-term IDR at 'BBB'; Stable Outlook;

--Short-term deposits at 'F2'; Stable Outlook;

--Short-term IDR at 'F2'; Stable Outlook;

--Individual rating at 'B/C'; Stable Outlook;

--Support at '5';

--Support Floor at 'NF'.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Doriana Gamboa, +1-212-908-0865
Meghan Crowe, +1-212-908-9121
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com

Copyright Business Wire 2009