First Niagara Financial Group (FNFG) in Buffalo, N.Y., has been hiring lenders while it looks for a new leader.

Higher deposit service fees and loan growth padded revenue in the second quarter, and management expressed confidence Friday that it can sustain momentum in the current quarter.

"The upshot is that we think we'll have a strong third quarter," Gregory Norwood, the $37 billion-asset company's chief financial officer, said in an interview. "We have a very strong loan pipeline for July."

First Niagara distinguished itself from other regional banks, most of which posted quarterly gains from cost control and larger-than-expected reserve releases, says Bob Ramsey, an analyst at FBR Capital Markets.

"They're sort of the opposite of what we've been hearing from other banks this quarter," Ramsey says. "They've got tremendous fee income growth and loan growth."

Overall, First Niagara earned $64 million in the second quarter, compared to an $18.5 million loss a year earlier that was tied to acquisition costs. Total loans rose 10% from a year earlier, to $20.7 billion; the net interest margin expanded by 10 basis points, to 3.36%.

Net interest income rose 4% from a year earlier, to $269 million. Noninterest income was flat, at $95.5 million. Deposit service fees rose 24% from a year earlier, to $26.5 million.

Management may be managing expectations by guiding analysts to a $100 million rise in interest-earning assets during the third quarter, Ramsey says.

"Loan growth has been a hallmark of their franchise," Ramsey says. "I was a little surprised" at the guidance. "I was trying to get a sense of whether they were sandbagging expectations."

First Niagara has "always been clear" that some of its loan growth would involve a shift in assets, Ramsey says. "Half of their loan growth [is going to] be funded by securities runoff," he says.

The company is still looking for a permanent replacement for John Koelmel, who was ousted in March as criticism mounted over his aggressive acquisition strategy.

First Niagara is "not working toward a specific deadline" for hiring a new chief executive, Gary Crosby, the company's interim CEO, said during a conference call Friday to discuss quarterly results. A Buffalo television station reported in May that First Niagara had agreed to pay Koelmel $5 million in severance.

First Niagara has had a revolving door of personnel since Koelmel's departure. Avi Patel, its former chief marketing officer, took a post at Fulton Financial (FULT), and Oliver Sommer, who had been vice president of corporate development, left in March.

First Niagara continues to look for a chief marketing officer to succeed Patel, but there "is no active search" to replace Sommer, Norwood says.

The company said Friday that it hired 10 people during the second quarter, including commercial-and-industrial and commercial real estate lenders, and treasury management experts. The new additions are based in New York and New England and came from JPMorgan Chase (JPM), Wells Fargo (WFC), PNC Financial (PNC), Huntington Bancshares (HBAN) and KeyCorp (KEY), Norwood says.

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