Community bank First Niagara Financial Group's (FNFG) stock, which I first wrote about on April 27, 2009, at a price of $13.55, continues to progress this winter, with the stock rising about 10% to $15.

First Niagara's fundamentals remain strong, including a superior residential loan portfolio. Also, following the completion of its pending merger with NewAlliance Bancorp (NAL), subject to approvals, First Niagara will have more than $29 billion in assets, $18 billion in deposits, and 340 branches. The proposed merger also should create greater economies of scale and generate synergies that decrease expenses.

The shares of community bank First Niagara Financial Group (FNFG), which I first wrote about on April 27, 2009 at a price of $13.55, have recovered enough such that it makes sense to continue with the trade.

First Niagara's shares fell in bear-hug fashion this year, with the decline accelerated after the bank bought RTI Insurance Services and Three Rivers Financial Services of Pittsburgh; some selling was due to integration costs.

Still, FNFG's fundamentals remain strong, including a superior residential loan portfolio. Moreover, the stock appears to have bottomed at/near $11 and the recent rise above the key, 50-day moving average -- a bullish technical indicator -- provides further evidence that the short-term investment players are out of the stock.

It's been a disappointing summer for the shares of community bank First Niagara Financial Group (FNFG), first discussed here on April 27, 2009 at a price of $13.55.

On Thursday, First Niagara agreed to acquire 88-branch NewAlliance Bancshares (NAL) for about $1.5 billion, in a deal expected to create a combined bank with more than $29 billion in assets.

Earlier in August, First Niagara bought RTI Insurance Services and Three Rivers Financial Services of Pittsburgh.

Analyst Upgrades

• Thomas Weisel upgraded Deckers Outdoor (DECK) to overweight from market weight following channel checks. The firm also raised its target for shares to $170 from $162.
• Deutsche Bank upgraded Amerigroup (AGP) to buy from hold as it believes the company is well positioned to benefit from health care reform. The firm upped its target for shares to $42 from $38.
• Cowen upgraded Cubist Pharmaceuticals (CBST) to outperform from neutral, citing increased conviction in Cubicin's patent exclusivity.
• OmniVision (OVTI) was upgraded to strong buy from buy at Needham.
• Take-Two (TTWO) was upgraded to buy from hold at ThinkEquity.
• Wells Fargo (WFC) was upgraded to buy from neutral at Sterne Agee.

The shares of community bank First Niagara Financial Group (FNFG), which I first wrote about on April 27, 2009, at a price of $13.55, have meandered for the better part of a year, but I still like company at this juncture. Here's why:

First Niagara's value proposition remains the same: a community bank with few non-performing mortgages. Its residential loan portfolio, all in-house, is performing well. Also, in the first quarter of 2010, average commercial loan balances increased at a 15% annualized rate, on solid commercial business loan growth in Upstate New York and in Western Pennsylvania. FNFG now has $20 billion in assets, $14 billion in deposits, and 255 branches.

Community banking may become an enduring trend in the current decade, and that's a major reason I'm reiterating my buy rating for First Niagara Financial Group (FNFG), first recommended on April 27, 2009, at a price of $13.55.

First Niagara's stock has continued to meander since the spring buy call, but the value proposition remains the same: a community bank with few non-performing mortgages. Its residential loan portfolio, all in-house, is performing well.

One new rule of the post-financial crisis era is that bank 'bigness' does not reduce the risk of a bank stock investment. In fact, the opposite may be true, which is why I'm I'm reiterating my buy rating for First Niagara Financial Group (FNFG), first recommended on April 27, 2009, at a price of $13.55.

First Niagara's stock has continued to meander since the spring buy call, but the value proposition remains the same: a community bank with few non-performing mortgages. Its residential loan portfolio, all in-house, is performing well. FNFG posted Q3 earnings per share of 7 cents, compared to the First Call Q3 EPS estimate of 13 cents.

Do a double-take, if you like, but I'm reiterating my Buy rating for a bank stock, First Niagara (NASDAQ: FNFG), first recommended on April 27, 2009 at a price of $13.55.

First Niagara's stock has meandered somewhat since the spring call, but the value proposition remains the same: a community bank with few non-performing mortgages. It's residential loan portfolio, all in-house, is performing well.

Analyst upgrades:

• Baird upgraded Tenet Healthcare (NYSE: THC) to Outperform from Neutral and raised its target to $6 from $5 based on cost trends, valuation, and expectations the company can beat expectations over the next six months.
• Oppenheimer upgraded E-House (NYSE: EJ) to Outperform from Perform following the company's better-than-expected Q2 results. The firm has a price target of $27 on shares.
• JPMorgan upgraded Avery Dennison (NYSE: AVY) to Overweight from Neutral and has a $33 target on the stock. The firm cites valuation for the upgrade following the recent underperformance and expects the company's margins to expand as demand rebounds.
• Citigroup (NYSE: C) was upgraded to Buy from Underperform at BofA/Merrill.
• Taubman Centers (NYSE: TCO) was upgraded to Conviction Buy from Buy at Goldman.
• First Niagara (NASDAQ: FNFG) was upgraded to Buy from Neutral at Janney Montgomery.

TheStreet.com's Jim Cramer says existing players would give better deals to the taxpayers here.

If the FDIC is poised to split banks to lure buyers, which is the headline from last week's papers, the buyers worth luring are not only the NewAlliances (NYSE: NAL) (Cramer's Take) and the First Niagaras (NASDAQ: FNFG) (Cramer's Take) but also Chinese banks and HSBC (NYSE: HBC) (Cramer's Take) and Barclays (NYSE: BCS) (Cramer's Take), both of which reported great quarters yesterday.

We keep focusing on these private-equity entrees that need to be intrigued to get in. I say to heck with them. That's nonsense. We need deep-pocketed existing banks that want to be bigger in the United States, not more handouts to private-equity firms that then bring them public in our faces and make a ton of money off us. We need ones that know how to run banks and know how to compete against the new colossuses like Bank of America (NYSE: BAC) (Cramer's Take), JPMorgan (NYSE: JPM) (Cramer's Take) and Wells Fargo (NYSE: WFC) (Cramer's Take).

TheStreet.com's Jim Cramer says its acquisition of Harleysville could make it a great regional player in the East.

When we look back at the coming great banking consolidation making a host of new colossuses, we will think about First Niagara's (NASDAQ: FNFG) (Cramer's Take) acquisition of Harleysville National (NASDAQ: HNBC) (Cramer's Take) announced on a sleepy Monday near the end of July 2009.

First Niagara, a Lockport, N.Y., bank, earlier this year received a gift from the FDIC -- a big chunk of PNC Financial (NYSE: PNC) (Cramer's Take) branches -- made necessary because PNC had too much market power courtesy of its now seemingly disastrous acquisition of National City. That move gave First Niagara a foothold in western Pennsylvania to complement its New York base.

TheStreet.com's Jim Cramer says some really good things are happening, but you wouldn't know it from reading the headlines.

You want to shoot yourself when you read these headlines. "Local Banks Face Big Losses," is the lead story in The Wall Street Journal, a fomented survey story telling us that commercial lending is going to sink local and community banks under a pile of $100 billion in bad loans.

This is news?

So what!

A bank stock? In this market? Indeed, opportunities exist, but you have to pick your battles, and First Niagara Financial Group (NASDAQ: FNFG) is one.

First Niagara is that best of all possible banks for the new era. A conglomerate? No. A bank of scale? No. It's a community bank, and it contains the golden goose of banking: few non-performing mortgages!

Analyst upgrades:

• Jefferies upgraded MICROS Systems (NASDAQ:MCRS) to Buy from Hold as it believes the company's cost cutting is running ahead of Street expectations. The firm raised its target on shares to $25 from $18.
  
• KeyBanc upgraded Cheesecake Factory (NASDAQ:CAKE) to Buy from Hold. The analyst believes companies will beat EPS estimates given lower commodity costs, focus on cost controls, and reduced drag of inefficient, new restaurants on unit level margins. Additionally, they believe reduced mortgage payments from refinancing will incrementally help traffic.
  
• Keefe Bruyette upgraded First Niagara (NASDAQ:FNFG) to Outperform from Market Perform on valuation following the company's Q1 results. The firm raised its target price to $15.
• American Electric Power (NYSE:AEP) was upgraded to Overweight from Neutral at JP Morgan.
  
• Royal Gold (NASDAQ:RGLD) was upgraded to Sector Performer from Sector Underperformer at CIBC and to Neutral from Underperform at Banc of America/Merrill.
  
• Micron (NYSE:MU) was raised to Overweight from Equal Weight at Barclays.