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First Niagara growth spurt isn't over Top acquisition sets stage for 'very patient' approach, CEO says

John R. Koelmel, a week after wrapping up First Niagara Financial Group's biggest acquisition ever, hasn't lost the urge to buy.

The next deal just might not happen right away.

"You need to be very patient, because pricing is getting a little goofy," Koelmel, First Niagara's president and CEO, said after the Buffalo-based bank's annual shareholders meeting Tuesday. "We expect to see some of that [pricing] come back to us over the next two to three years."

In the meantime, First Niagara is focusing on becoming more efficient and better integrating its operations, which now include the recently acquired NewAlliance Bancshares, a New Haven, Conn., bank that pushed First Niagara into the Connecticut and Massachusetts markets.

That "build and buy" strategy has helped First Niagara nearly quadruple its asset base to $30 billion and more than double its work force over the last five years, as the bank has expanded across New York to Albany and also pushed into the Pittsburgh and Philadelphia markets in Pennsylvania.

The NewAlliance deal, which closed April 15, added 88 branches, 200,000 customers and $8.8 billion in assets in Connecticut and Massachusetts.

"Discipline is what got us here," Koelmel said. "We'll be patient, but we'll be persistent."

First Niagara's primary focus on growth lies in the wealthier and faster-growing markets along the Interstate 95 corridor stretching from Boston to Philadelphia, Koelmel said.

"I expect to be something more in the coming years than we are today," he said. "To be really successful in the longer term, we really believe we need to stretch our footprint."

So far, First Niagara's expansion has worked out well, creating what Koelmel described as "an enviable franchise" at a time when most of the U.S. banking industry has been reeling.

Its first-quarter profits jumped by 53 percent, excluding one-time costs related to the merger. First Niagara's portfolio of troubled loans amounts to less than 1 percent of its outstanding borrowings, well below average. At the same time, its deposit base has swelled to $18 billion. "My belief is that whoever can do the best job getting deposits over the years, those are the organizations that are going to win," Koelmel said. "Banking isn't a complicated business. Those who made it such are either out of business or trying to climb out of the ditch they've dug for themselves."

First Niagara last week said that it was launching an effort to "reposition" the bank's branches and back-office operations, while also restructuring its real estate holdings.

Those plans, expected to cost upward of $30 million, include closing up to 10 percent of the bank's 345 branches, while also changing how the bank delivers back-office services to take advantage of its expanded scale. The bank also will spend $20 million to get out of recently acquired facilities, mostly in eastern Pennsylvania.

Koelmel said the repositioning is expected to positively affect the bank's operations in Western New York, including its 400-employee headquarters at the Larkin at Exchange Building in Buffalo. "We expect," he said, "to be a progressively larger player in Larkinville."


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