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First Niagara plans focus on organic growth

Rochester Business Journal
November 9, 2012

Additional acquisitions are not in the offing for First Niagara Financial Group Inc., which plans to spend the next few years filling out existing territories, including the Rochester market, a top executive said last week.
 
The Buffalo-based company is the parent of First Niagara Bank N.A., whose local deposits of $1.5 billion as of June 30-the most recent information available-rank fifth in the Rochester market after the purchase of branches from HSBC Bank USA N.A. in May.
 
The bank was ninth in 2011 rankings compiled by the Federal Deposit Insurance Corp.
 
"The numbers moved to fifth, increasing the density and size of the branches," Chief Financial Officer Gregory Norwood said last Friday during a stop in Rochester.
 
"And then bringing in the (HSBC) teammates to the footprint moves us to that next level that we've been looking for here. So we see a lot of opportunity there for loan growth. We're big in health care here. Certainly, with more branch density, that helps drive the business banking and middle market."
 
First Niagara Financial Group, which employs some 400 people in the Rochester market, also is the holding company of First Niagara Risk Management Inc., whose headquarters are in Brighton. Risk Management employs 110 here.
 
"We like the risk management business," Norwood said during a visit to the company. "We believe we have the team that is doing it successfully. We believe it's comparable to others in the industry that have done it successfully. We're committed to the product and committed to the service."
 
Risk Management employs nearly 400 people in New York, Pennsylvania and Connecticut.
 
"I see us growing in this market," said Suzanne Nasipak-Chapman, Risk Management's regional director and First Niagara's market executive in Rochester. "Our focus, just like every other segment of the bank, is organic growth."
 
"Part of the question as we went into the budget season was what our personnel needs are in order to hit these growth targets. We both have budgets around those things."
 
First Niagara acquired 195 HSBC branches in Upstate New York and southern New England. It sold 61 branches to three other banks, including 20 in the local market, for regulatory and antitrust reasons. It also consolidated nine branches here.
 
First Niagara is now a dominant bank in Western New York because of its deal with HSBC, whose roots are with Marine Midland Bank N.A., said Dennis Lohouse, a principal at Forte Capital LLC in Brighton.
 
"Marine Midland had been a traditional leader in branch locations and the number of branches in the state," Lohouse said.
 
"(First Niagara is) in a consolidating process now because regulators insisted they close or sell a number of those branches. The regulators' concern is a plus for the bank, and that is that they have become a dominant retail presence in a market that has seen this shift from large banks to more regional-type banking."

No consolidations here
Although President and CEO John Koelmel hinted that there might be more consolidations during a conference call with analysts last month, Norwood said Rochester is unlikely to be affected.
 
"In Rochester, I don't see any meaningful change," he said. "I think what John was saying is we will consistently look at what is the right footprint in every market. We don't see a lot of that in Rochester, in a meaningful way, but over the next two years I would see us consolidating across the footprint."
 
First Niagara has implemented at least two rounds of job cuts this year, including 180 companywide last month. Five jobs were lost in the Rochester market, Norwood said. It eliminated some 200 assistant manager positions companywide in January.
 
The bank does not anticipate additional restructuring, Norwood said.
 
"From a business perspective, we see increasing people," he said. "We see that in Rochester. We see it against our entire footprint, and continue to see that number going up through the next four or five years.
 
"When we looked at the company after all four of the acquisitions, plus completing HSBC, we looked across the footprint at where we need the people and the type of people we need to operate the model we have. We made decisions that are obviously difficult, and they're personal. They affect families, not just individuals, so it was tough."
 
First Niagara employs some 6,000 people in New York, Pennsylvania, Connecticut and Massachusetts.
 
"When you look at First Niagara over the last five years, they really have come through the whole financial crisis in really good condition," Lohouse said. "That tells me they ran a conservative book. They did not have a lot of nonsense, a lot of bad mortgage debt, on the balance sheet."
 
In response to the 180 cuts last month, representatives said the bank also is looking to fill 250 positions. In January, representatives said the 200 job losses would be offset by the addition of 100 new positions in small-business banking and wealth management.
 
"I don't see that as a recurring episode," Norwood said of the job reductions. "We took a very deliberate view, a very long-term view. It continues to grow, but you need the right people in the right places to serve the customers we have now."
 
The reorganization of employees will improve efficiency and position First Niagara for growth, Norwood said.
 
"That's why, even now, we continue to hire new people," he said. "One of the areas we're making a lot of investments in is our fee-income capability on the commercial side in cash-management products for customers. We need people with those skills.
 
"On the retail side, in digital, online banking, we're hiring there. We need more of those people and fewer people that would do some operational things, so we're more efficient now in technology."
 
First Niagara has 430 branches, $36 billion in assets and $28 billion in deposits.
 
"Rochester has always been an important part of the franchise," he said. "With HSBC, we moved it up quicker than we would've done through other mechanisms.
 
"Whether it's the insurance presence or the growing ability to help commercial companies, we've had roughly 17 percent commercial loan growth over the last three years. Now that we're basically twice as big, we see a lot of opportunity to continue to do that."

Growth path
Excluding loans acquired from HSBC, First Niagara increased its commercial loans by $463 million, or 17 percent, in the third quarter, it reported last month. It was the 11th consecutive quarter with at least 10 percent growth.
 
Total loans and leases were at $19.1 billion on Sept. 30, up 2 percent from the end of the second quarter and up nearly 15 percent from the third quarter of 2011, the bank reported.
 
"That's really good growth for them, in an environment where commercial lending hasn't been growing," Lohouse said. "It seems to me that First Niagara is positioning itself as the lender of first choice for small and midsize businesses."
 
First Niagara's buying spree in the last three years also included banks in the Pittsburgh, Philadelphia and southern New England markets, followed by insurance acquisitions in Pennsylvania and Connecticut.
 
"We've been clear since January that M&A is not part of our strategy at this point," Norwood said. "We like the footprint. We like the team. We like the product mix.
 
"John and I have not had one conversation around acquisitions. I talk more about it when answering questions than I do internally. But that doesn't mean, 10 years from now, we're going to be a $35 billion bank. Growing organically always has been something we do."
 
Norwood joined First Niagara in April 2011 after serving as president and chief risk officer for Ally Financial Inc. He held senior treasury positions at Wachovia Corp. in Charlotte, N.C., for five years and before that was corporate controller at Bank of America Corp.
 
"I came to First Niagara for the reason a lot of people have come and have stayed," Norwood said, "because we're building something."

11/9/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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