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What: Shares of First Niagara Financial Group (NASDAQ:FNFG) jumped more than 16% today on reports that the Buffalo-based bank hired JPMorgan to advise it on a possible sale.

So what: First Niagara's 394 branches are concentrated in the Northeast, making it an attractive acquisition for a number of larger banks in the area. Bloomberg identified New York Community Bancorp, Toronto-Dominion, and Huntington Bancshares as potential acquirers.

First Niagara has an attractive mix of low-cost customer deposits. The company last reported having $28.2 billion of deposits, which cost it an average of 0.23% per year. It also offers any acquirer the No. 2 position in its core market of Buffalo, New York, where the bank has deposit market share of 26%, according to data from the FDIC.

Now what: There's only one reason to put a company in play: First Niagara is ready to sell. The bank could be very attractive for banks that share its footprint. The company has been actively working toward a plan to improve its profitability, bringing its return on assets up to 1% by 2017 or 2018. But if First Niagara sells out to a larger bank and eliminates duplicate branches, its shareholders may be able to enjoy the proceeds of its improving profitability sooner rather than later.

 

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.