First Niagara Financial Group, in a stunning announcement late Friday, said its board replaced longtime president and CEO Paul J. Kolkmeyer because of differences in management style and approach, and the company's sluggish financial performance of late.
The action by the nine-member board was effective immediately, with Kolkmeyer, 53, resigning from management and the board. Chief Financial Officer John R. Koelmel, 54, was named president, chief operating officer and acting CEO.
"The board decided it was time for a change in leadership at the CEO level, based on differences in management style and approach in accomplishing their objectives," said spokeswoman Leslie G. Garrity. "Our strategy is not going to change, and the board is really focused on furthering that strategy."
Chairman Robert G. Weber praised Koelmel's performance during the last three years as executive vice president and CFO, citing "a high level of effectiveness" in leading financial operations and working with other executives to achieve the company's goals.
"We believe John is the best person to lead First Niagara going forward based on his capabilities and the support he has from the very strong management team already in place in all of our business units and corporate functions," Weber said in a press release.
As a result, the company said it is not conducting a search for a new CEO at this time, but left "acting" in Koelmel's new title.
However, Garrity stressed that his appointment is "not an interim step."
"There is no transition period. There is no trial period," she said. "The board chose to name him acting as a way to show complete confidence in him and demonstrate that they're looking to move forward with John as First Niagara's leader, but they do want to give him time to function in the role."
She also said, in response to a reporter's question, that the company's objectives and overall strategic direction will not change, and the company is not setting itself up for a sale.
"The board is focused on further executing on our strategy," she said.
The decision was made Friday at a special meeting outside the regular schedule, but Garrity said it was not triggered by a specific event. She would not say if the vote was unanimous or provide any other details.
"While there is never a perfect time to make these types of decisions, the company did think it was important to make this change now so that First Niagara's management team could focus all of its energies on building the company, strengthening financial performance and increasing shareholder value in 2007," she said.
The surprise and abrupt action comes despite a strong record of growth for First Niagara since Kolkmeyer took the helm in December 2003, following the death of former CEO William Swan. Since then, the savings bank has doubled in size to $8 billion in assets and $5.6 billion in deposits, and has amassed a network of 120 branches stretching across upstate New York, as well as the largest insurance agency in Upstate New York.
Yet, the financial performance of the company, and especially its stock, has lagged, despite a much vaunted strategic plan to boost revenues by deepening customer relationships and cross-selling more products.
Earnings per share have hovered between 20 cents and 23 cents for seven quarters. Revenues have risen less than 5 percent from one quarter to the next for the last year.
After peaking at its all-time high of $16.30 in July 2003, before Kolkmeyer took over, the stock tumbled to less than $12 in June 2004 before recovering. However, it has only barely topped $15 on a few occasions since then and never came close to its record.
Shares have returned less than 1 percent in the last year, compared to more than 40 percent for two of its peers, according to Bloomberg data. The stock ranks 303rd out of the 400 members of the Standard & Poor's Midcap 400 Index for year-to-date returns.
Shares fell 5 cents Friday to close at $14.36, but First Niagara released the news after the market closed.
"The board of directors and I greatly appreciate Paul's tireless efforts to build First Niagara's business throughout his tenure as CEO," Weber said in a press release.
But, he added, "First Niagara's board of directors has a very strong commitment to continue building the company, strengthening financial performance and enhancing shareholder value."
Speculation on Wall Street that something was up already had been prompted by the abrupt cancellation Thursday morning of First Niagara's presentation at an investor conference sponsored by brokerage Ryan Beck & Co. No reason had been given.
Koelmel joined First Niagara in January 2004. He previously served as senior vice president and chief administrative officer of Warsaw-based Financial Institutions, parent of Five Star Bank. He spent 26 years at auditing firm KPMG LLP, serving many banking and financial services clients, and was also managing partner of KPMG's Buffalo office, supervising other offices in Rochester, Syracuse and Albany.