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Lockport Savings Bank is inching its way toward the Rochester market.

That's why the savings bank's parent company, Niagara Bancorp Inc., agreed to buy the tiny Albion Banc Corp. last week, paying $12.4 million to acquire its branches in Albion and Brockport.

It's also why the thrift earlier this month moved into the Rochester mortgage market with the opening of a loan origination office. And it's why Lockport Savings was among the final bidders who lost out on the chance to buy FNB Rochester Corp., which ultimately was gobbled up by Buffalo's M&T Bank Corp. for $129 million earlier this year.

"We feel there is a place for a community bank there," said William E. Swan, Lockport Savings' president. "From a banking and financial standpoint, we do see similarities" between the Buffalo and Rochester markets.

"I think it's a natural progression," Swan said.

Of course, buying Albion Federal Savings and Loan will hardly put Lockport Savings among the heavyweights of Rochester's banking market. But it will get Lockport Savings' foot in the door and put it in the position to expand its presence there through future acquisitions or just plain honest-to-goodness growth.

After all, in the new age of banking, it's an eat or be-eaten world. Banks are buying each other like there's no tomorrow, branching out into new cities and, for the big banks, pushing into new states.

The goal is to be a major player in each market, and usually, the easiest and fastest way to bulk up in a particular region is to buy another bank that's already there. As a result, the banking industry has been in the midst of a merger boom.

In the second quarter alone, the banking and finance industry announced 94 deals valued at more than $48 billion, making it the second-hottest sector for mergers and acquisitions, according to Mergerstat, a California company that tracks merger data.

When M&T bought First National Bank of Rochester, it was all part of its plan to be a major player in all of the big upstate markets. It's also why M&T is buying Chase Manhattan Bank's branches in the Buffalo, Jamestown, Binghamton and Albany areas.

For Lockport Savings, the key to its growth has been to look beyond its roots in Niagara County, where it enjoys a cozy 25 percent market share and is the No. 2 bank, second only to HSBC Bank.

As a result, Lockport Savings has been trying to build its business in Erie County, where it had just a 2.5 percent share of the market in June 1998, the latest figures on total deposits available from the Federal Deposit Insurance Corp. To bring in more business, Lockport Savings opened branches in Grand Island, Orchard Park and Williamsville last year and plans to open another in Amherst by the end of the year.

The bid to buy Albion Federal Savings, which still must be approved by shareholders and regulators, is part of Lockport Savings' push to the east, toward Rochester. "It's so nice when you can do a contiguous acquisition," Swan said. "When (the FNB Rochester deal) fell apart, we had our whistles whetted for a full-bank acquisition."

By purchasing Albion Federal S&L, Lockport Savings is adding $61 million in deposits, which won't make a big ripple at a thrift that already has total deposits of $1.1 billion.

But the deal makes Lockport Savings a strong
No. 2 in the Orleans County market, combining its own 15 percent share of the market with Albion's 12 percent piece of the pie. That puts the combined bank behind HSBC's commanding 48 percent market share, the FDIC figures show.

"If you can be in the top two or three in any market, you're going to be more of a factor," Swan said.

Plus, Albion's Brockport branch gives Lockport Savings its first office in Monroe County and a toe-hold in the Rochester market that it's been eyeing for some time.

And with Lockport Savings still flush with cash after its initial public stock offering last year, the thrift still is on the lookout for more acquisitions. "I've turned into an M&A guy. I'm looking for deals to help the bank," Swan said. "We know we have a lot of capital and we need to put that to work."

So while Lockport Savings was looking for opportunities to spendmoney to help its grow, Albion Federal was trying to figure out how, with its limited resources, it could provide a good return for its shareholders and stay competitive in the consolidating banking industry.

"Really, it comes down to shareholder value and a look at your market long-term. Are you going to be able to service your customers as well as someone larger, like Lockport," said Jeffrey S. Rheinwald, Albion Federal's president. "The conclusion was that we should partner, or form an alliance, with a bigger institution."

"It's as much a size issue as anything else," he said. "There are economies of scale with everything."

With the demand among customers growing for new products and services from their bank, Albion Federal was facing some tough decisions. Competition, for one, was getting tougher. "You had to work a lot harder to get that piece of the pie and, looking to the future, it wasn't going to get any easier," Rheinwald said.

What's more, the thrift likely would have to spend a considerable amount of money if it wanted to offer the same type of services that were available from its competitors, like Internet banking.

"With Internet banking becoming the wave of the future -- and that's just to cite one example -- that requires a large investment in your operations and it takes a long time to earn that investment back," Rheinwald said.

So when Lockport Savings came along with a $15.75 per share offer that gave Albion shareholders the chance for a 19 percent profit overnight, it wasn't a hard choice. And the deal was done.

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