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Job cuts feared if First Niagara is sold

If First Niagara Financial Group is ultimately sold to an out-of-town buyer, the Buffalo Niagara region faces the potential loss of hundreds of headquarters and back-office jobs, if past history is any guide.

When an acquisition results in overlapping groups of employees in human resources, information technology, marketing and other support and administrative functions, the acquiring company typically looks to wring savings by laying off redundant workers.

“If First Niagara were sold to an out-of-area bank, I would be very concerned about the impact that would have locally with regards to employment at their headquarters, as well as their call centers and other branches,” Erie County Executive Mark Poloncarz said Wednesday.

Of First Niagara’s 5,400 employees across its four-state territory, about 2,300 work in Western New York, including 750 at its Larkinville headquarters.

Jeff K. Davis, managing director of the Financial Institutions Group at Mercer Capital, said the potential impact of a sale on the Buffalo headquarters is “not good.”

“Roughly half the cost in any bank is going to people, either direct compensation or health care or that sort of thing,” Davis said. If a typical bank acquisition targets expense savings of 30 to 40 percent, he said, “that’s a big chunk of people.”

When First Niagara acquired Great Lakes Bancorp, the parent company of Greater Buffalo Savings Bank, in 2008, First Niagara cut about 70 percent of Greater Buffalo Savings’ costs by offering jobs to just 105 of Greater Buffalo’s 224 employees and by closing or consolidating six Greater Buffalo branches.

Buffalo also has been on the other side of previous banking acquisitions.

When Buffalo-based M&T Bank bought Allfirst Financial, which had its United States headquarters in Baltimore, the bank in 2003 announced it would lay off 1,132 Allfirst employees, or about 20 percent of Allfirst’s workforce in this country. A little more than half the layoffs came in Baltimore, with the remainder in other parts of Allfirst’s footprint.

A First Niagara sale could be a setback at a time when Buffalo Niagara has enjoyed a reinvestment in Canalside, downtown Buffalo and the Buffalo Niagara Medical Campus.

It also could be a blow to the bank’s charitable donations in the area. First Niagara said it directed $2.26 million in charitable giving to the region last year, out of about $10 million in contributions across its territory. First Niagara also reported 26,000 volunteer hours donated by its staff.

“First Niagara is a major player in the local economy. It’s a major player with our local nonprofit entities and groups. I, like many other people, would be very disappointed to see it sold to an out-of-area concern and the possibility of losing that important function in our community,” Poloncarz said.

Louisville, Ky., has seen all of its locally based banks bought by large, out-of-town financial institutions, said Kent Oyler, president and CEO of Greater Louisville Inc., the area’s chamber of commerce. The effect is felt distinctly in the loss of the local bank executives’ dedicated service to the boards of arts councils and other charities in the community.

Oyler said Louisville also is waiting to see how the pending, $37 billion merger of Aetna Insurance with Louisville-based insurer Humana will play out. Oyler said Louisville is making a pitch to serve as the headquarters of the merged company.

News Business Reporter Matt Glynn contributed to this report. email: swatson@buffnews.com