First Niagara is a Major Player

First Niagara Financial Group (FNFG) is my favorite regional bank. Here’s three reasons why:

Reason One – Rapidly Growing

The company is growing. Last year in First Niagara’s Annual Meeting of Stockholders, the company stated it was among the top 35 banks in assets. On December 20th the company moved to buy New Alliance Bancshares (NAL). Once the deal finalizes, FNCG will become a top-25 bank in assets.

So First Niagara is one of America’s fastest growing regional banks.

Reason Two – Solid Total Return

Here’s FNFG’s actual profits (a) for 2009 and expected profits through 2012:

2009 0.47 a
2010 0.85
2011 1.02 (+20%)
2012 1.15  (+13%)

The estimated long-term growth rate on FNCG is 15%. So the stock could compound at that rate, if profits come through at that rate and the P/E stays the same.

What’s nice is the stock has a dividend of 4% – moving the potential annual return to a hypothetical 19%. This would be a solid total return.

Reason Three – Conservative Areas

Banks got in trouble in 2008-2009 because of overbuilding and speculation. Miami condo’s were being purchased by people trying to flip them for a quick buck. Condo prices went sky high, then dove when the market crashed. Many homes are underwater — owners might as well let the lender foreclose.

Memphis homes were built by the hundreds on undeveloped land, and sold to people with no money down and not enough income to make the payments. The Memphis real estate market is still struggling to make ends meet, and make monthly payments on homes (either lived in or vacant).

First Niagara is focused in Buffalo, Albany, Pittsburg and Philadelphia. These are predominantly blue-collar towns. People buy a home, pay off the mortgage and retire. I tried to get a house “on sale” in Buffalo when the real estate market crashed in 2008, but the prices there weren’t down. The agent said they weren’t down because they never went up. Drive around the area and there is very few new subdivisions.

NewAlliance will bring the company into Connecticut and Massachusetts.

I feel FNCG is a safe stock because the loans should be paid back.

Bottom Line

The bottom line on FNFG is this seems to be a fairly safe investment for someone looking for a good total return in a stock. The comapny is growin, which should grow the share price, the stock pays a dividend of 4% which can put money in your pocket, and the ground First Niagara is based in (Rural New York, Pensylvania and now Conneticut and Massachusetts) is solid.

First Niagara’s Path Could Be a Game-Changer