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First Niagara Financial Group's profits soared by 77 percent during the first quarter as the Lockport-based thrift had double-digit growth in its commercial real estate and business lending, while also taking in 34 percent more money in fees.

First Niagara's profits swelled to $22.1 million, or 19 cents per share, from $11.9 million, or 15 cents per share, a year ago as the company completed its first quarter since its $580 million acquisition of Hudson River Bancorp.

The earnings matched the expectations of Wall Street analysts, and the company repeated its earlier forecast that its profits for the full year would grow to 82 cents per share, including merger-related expenses, and between 83 to 84 cents per share, excluding those costs.

"We are off to a very good start to 2005," said Paul Kolkmeyer, First Niagara's president and chief executive officer.

First Niagara executives said Friday they were especially pleased with the way Hudson River's operations have been melded into the First Niagara system. Expenses related to the merger, which reduced first-quarter profits by $2.3 million, or a penny per share, have been slightly lower than company officials expected and are expected to be minimal during the remainder of the year.

"We think the synergies are starting to be realized nicely," said John Koelmel, First Niagara's executive vice president and chief financial officer, during a conference call with investors and analysts.

"It looks like a pretty good quarter," said Kevin Timmons, an analyst at C.L. King & Associates in Albany. First Niagara shares, which are down 7 percent for the year, rose 19 cents to $13.

With its Hudson River acquisition complete, First Niagara now is focusing on ways to bolster its profits, including building deeper relationships with its customers, expanding its commercial lending business, opening new branches and making strategic purchases of financial services firms, such as insurance agencies.

First Niagara also used some of its excess capital to buy back 1.8 million shares of its own stock during the quarter.

"We're not out actively looking to do a whole bank acquisition," Kolkmeyer said. "We're continuing to look for financial services acquisitions, particularly insurance agencies."

The company also plans to open "a dozen or more" branches during the next 15 months to 18 months, Koelmel said. First Niagara has signed leases for seven new branches in the Buffalo and Rochester areas this year and could add one more, with three of the new offices in Rochester and five in the Buffalo market.

First Niagara's net interest margin -- the gap between the interest the thrift pays on deposits and takes in on loans -- widened to 3.76 percent during the quarter from 3.69 percent in the fourth quarter, although Kolkmeyer warned that he expects it to narrow in coming quarters as the competition for deposits inches rates higher and the yield curve flattens.

Non-interest income grew by 36 percent because of the acquisition of Hudson River and an insurance agency. Excluding Hudson River, the thrift added $42 million in new loans, with commercial real estate and business lending growing at a 10 percent rate.


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