First Niagara Financial Group in Buffalo, N.Y., reported lower second-quarter profit as the cost of technology improvements and lower securities yields offset loan growth.

The $39.1 billion-asset company's net income fell 22% to $53.5 million, or 15 cents per share, from a year earlier.

Net interest income fell 3.2% to $263.1 million. Income from investments and securities fell 6% to $86.4 million. The net interest margin tightened 24 basis points to 3.02%.

Total loans and leases rose 5% to $23.4 billion. First Niagara booked more loans in numerous categories, including commercial real estate, business loans, home equity loans and indirect auto.

The new lending is significant because, for the first time in several quarters, it came from borrowers taking out new credits, Greg Norwood, chief financial officer, said in an interview.

"Go back a year and loan growth was mostly banks taking share from each other," Norwood said. "Now we are seeing new credit generation."

Norwood acknowledged that the new loans are being booked at lower interest rates than the older credits in its portfolio.

"It will result in lower yields [until] the Fed acts on rates," he said.

Fee income rose 7% to $86.6 million. Capital markets income and merchant and card fees both increased from a year earlier.

Noninterest expense rose 2% to $247.9 million, as First Niagara boosted spending on technology, marketing and professional services; the cost of FDIC insurance premiums also increased. The efficiency ratio worsened to 70.9%.

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