-- 19% operating earnings growth vs. first quarter - 10% above prior year

-- Strong growth in low-cost core deposits drives margin higher

-- Credit trends compare very favorably

-- TARP investment fully repaid from strengthened capital position

-- Western Pa. market expansion on schedule

First Niagara Financial Group, Inc. (Nasdaq: FNFG), today announced second quarter 2009 operating (Non-GAAP) net income of $25.5 million or $0.18 per diluted share. Reported (GAAP) net income was $20.8 million or $0.08 per diluted share.

Operating Results (Non-GAAP)__ Q2 2009__ Q1 2009__ Q2 2008

---------------------------__ -------__ -------__ -------

Net interest income__ $79.9__ $72.6__ $66.6

Provision for credit losses__ 8.9__ 8.8__ 4.9

Noninterest income__ 28.8__ 28.5__ 29.6

Noninterest expense__ 60.3__ 58.5__ 56.6

Net income__ 25.5__ 21.5__ 23.1

Weighted average diluted shares outstanding 140.2__ 115.4__ 106.5

Earnings per diluted share__ $0.18__ $0.19__ $0.22

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Reported Results (GAAP)

--------------------------

Nonrecurring(a)__ $4.7__ $2.8__ $-

Net income__ 20.8__ 18.7__ 23.1

TARP(b)__ 9.4__ 2.6__ -

Net income available to common shareholders 11.4__ 16.1__ 23.1

Earnings per diluted share__ $0.08__ $0.14__ $0.22

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All amounts in millions except earnings per diluted share. The Non-

GAAP/Operating Results table above summarized the Company's operating

results excluding certain nonrecurring items.

(a) Q2 2009: After-tax noninterest expense - FDIC's special assessment

charge of $3.3 million based on each insured depository institution's

assets less Tier 1 Capital. Also includes expenses related to the National

City branch acquisition of $1.4 million. Q1 2009: After-tax

noninterest expense - Settlement of service mark infringement matter of

$1.8 million and professional service fees related to the National City

branch acquisition of $1.0 million.

(b) Q2 2009: Accelerated discount accretion of $7.7 million resulting

from the redemption of preferred stock purchased by the U.S. Treasury

Department under the Troubled Asset Relief Program and $1.7 million of

accrued dividends and preferred stock discount accretion through the

redemption date. Q1 2009: Accrued dividends and preferred stock discount

accretion of $2.6 million.

"Our second quarter operating performance was very sound," John R. Koelmel, President and CEO said. "We have not missed a beat as can be readily seen by the robust loan and deposit growth we're generating. Our track record on credit in this harsh economic environment continues to compare quite favorably to the industry and our peers. Our capital position remains strong as investors responded enthusiastically to our April equity offering, a sign of their confidence in our Company and our future prospects. That, in turn, enabled us to be among the first in the nation to repay TARP funds to the U.S. Treasury. I am also pleased to report that the completion of our branch acquisition in Pittsburgh and Western Pennsylvania is on schedule for September and our integration plan is on track," Koelmel added. "Our excitement about that market has only grown as we spend more time with customers, employees and community leaders. We are certainly proud to be emerging as one of the stronger players within the financial services industry and know that we must sustain the intense focus and discipline that got us here to make the most of our future opportunities."

Loans

Commercial loan average balances increased by $73 million or an annualized 8% from the first quarter as loan originations were higher by 19% and unscheduled commercial mortgage payoffs were lower than expected. Commercial loan pipeline activity remains strong, with an 11% increase over the first quarter of 2009. Home equity loan average balances increased by $14 million or 9% annualized due to a very successful spring promotion. The Company originated $170 million in new residential loans during the second quarter, however, average mortgage balances declined by $92 million due to ongoing consumer preference for long term fixed rate products which the Company does not hold in its portfolio.

Credit Quality

Credit quality trends continue to compare favorably to peers despite the ongoing weakness in the overall economy. Nonperforming loans remained stable at $52.3 million or 0.81% of total loans, and second quarter net chargeoffs decreased by $1.0 million from the linked quarter to $6.0 million, or an annualized 0.37% of average loans. The provision for credit losses was $8.9 million for the quarter, compared to $8.8 million in the linked quarter and $4.9 million a year ago. As a result, at June 30, 2009 the allowance for credit losses increased to 158% of nonperforming loans and 1.28% of total loans.

Deposits

Total core deposits now comprise 72% of total deposits, a sizable jump from 65% a year earlier. This significant increase was led by robust second quarter core deposit growth of $341 million across the retail, commercial and municipal customer segments. New retail checking account growth sustained its upward trend from the beginning of the year reflecting the Company's ongoing push to obtain active checking account relationships. The reduction in higher cost CDs continued in the second quarter with average balances declining by $98 million or 19% annualized, attributable to the Company's continuing focus on a disciplined pricing strategy.

Net Interest Income

Net interest income increased by 10% to $79.9 million from the linked quarter, driven by the Company's improved funding mix as lower cost core deposits and wholesale borrowings continued to replace higher rate CD balances. The increase was further enhanced by the earnings from securities purchased in anticipation of the third quarter closing of the National City branch acquisition which will bring $4 billion of deposits and $3 billion of cash liquidity. Despite the margin compression caused by these purchases, the decrease in deposit pricing increased the tax equivalent net interest margin to 3.63%, a 2 basis point improvement over the linked quarter.

Noninterest Income

Noninterest income for the current quarter was $28.8 million and slightly above first quarter levels. Higher loan fees due to strong mortgage origination volumes and seasonal increases in insurance and benefits consulting revenue offset lower wealth management fees due to weak market conditions.

Noninterest Expense

Operating (Non-GAAP) noninterest expense for the second quarter of $60.3 million increased by $1.8 million, or 3% from the linked quarter as the Company began to add people in anticipation of the National City branch transaction. Nonetheless, the operating (Non- GAAP) efficiency ratio for the second quarter improved to 55.5%. Reported (GAAP) noninterest expense includes $2.3 million related to costs incurred in connection with the National City branch acquisition and the FDIC special assessment charge of $5.4 million.

Capital Management

The tangible common equity ratio (Non-GAAP) at June 30, 2009 was 10.5%, a substantial increase from 8.9% in the linked quarter and 7.6% a year ago. The current quarter's equity balance reflects the benefit of the $360 million of capital raised through the April equity offering, less the $184 million paid to redeem the preferred stock purchased by the U.S. Treasury under the Troubled Asset Relief Program (TARP). Also in the second quarter, the Company repurchased the common stock warrant related to the Treasury's TARP investment. No shares of the Company's common stock have been repurchased since January 2008.

First Niagara Financial Group, Inc., through its wholly owned subsidiary First Niagara Bank, has assets of $11.6 billion and deposits of $6.2 billion at June 30, 2009. First Niagara Bank is a community-oriented bank providing financial services to individuals, families and businesses through 113 branches and four Regional Market Centers across Upstate New York. In April 2009, the Company announced plans to add another 57 branches in Pittsburgh, Warren and Erie, Pa., additional deposits of $4.2 billion and additional loans of $839 million in an acquisition that is expected to close in September 2009, pending regulatory approval. For more information, visit www.fnfg.com.

Conference Call - A conference call will be held at 10 a.m. Eastern Time on Friday, July 17, 2009 to discuss the Company's financial results and business strategy. Those wishing to participate in the call may dial toll-free 1-877-709-8150. A replay of the call will be available until August 6, 2009 by dialing 1-877- 660-6853, account #240, ID # 327034.

Non-GAAP Measures - The Company believes that non-GAAP financial measures provide a meaningful comparison of the underlying operational performance of the Company, and facilitate investors' assessments of business and performance trends in comparison to others in the financial services industry. In addition, the Company believes the exclusion of these items enables management to perform a more effective evaluation and comparison of the Company's results and to assess performance in relation to the Company's ongoing operations. The non-GAAP financial measures of tangible book value and tangible equity exclude intangible assets from total equity.

Forward-Looking Statements - This press release contains forward- looking statements with respect to the financial condition and results of operations of First Niagara Financial Group, Inc. including, without limitations, statements relating to the earnings outlook of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward- looking statements include, among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses; and (7) increased risk associated with an increase in commercial real-estate and business loans and non-performing loans.

First Niagara Financial Group, Inc.