First Niagara Financial Group Inc. played it safe during a credit boom that ultimately ruined many other banks.
John Koelmel, the Buffalo, N.Y., lender's president and chief executive, likes to remind people of that when he hears concerns that the serial acquirer may be on a reckless growth binge of its own.
"I say to many who wonder at times if we are going too far, too fast: we worked too hard through the worst times this industry has seen in a long time to get it right and do it right," he said in an interview Monday.
"We're one of the few, one of a handful at best, that came out of this storm and are better positioned today. … The last thing we are going to do is put that in harm's way."
First Niagara said this week it had agreed to pay $1 billion for 195 branches in upstate New York and Connecticut from HSBC Holdings PLC., its fourth major acquisition in less than three years. The others were NewAlliance Bancshares Inc. of New Haven, Conn., Harleysville National Corp. outside Philadelphia and 57 former National City Corp. branches in western Pennsylvania.
Koelmel spent the first 26 years of his career as a banking consultant for KPMG LLP before becoming First Niagara's CEO in 2006.
He spent Monday assuring investors and the press that First Niagara can manage its next big purchase.
The following is an edited transcript of the interview.
You just closed the purchase of New Alliance in April. How can you handle another big deal?
New Alliance was on the heels of Harleysville, which was on the heels of the Nat City transaction that, frankly, mirrors this one. So we're a little over two years with four meaningful transactions [in that time].
How do we do it? Back in 2007 and 2008 in particular we saw not only the house of cards for the industry starting to tumble, but we saw that that would translate into opportunity for us. That caused us to build up and build out the organization, whether it be with more capital, talent [or] systems.
While it has come to us quicker than we could have even anticipated … we have people that have joined us, people that are here that are energized by this series of opportunities as opposed to exhausted from it or trying to run away.
We're always looking at the next opportunity while we're trying to finalize or firm up what's in process. We have seen this particular one coming, whether it be a big bank shedding some assets, whether it be HSBC in particular.
We knew we wanted to be as ready as we could be, because time is accelerating how the rest of the world thinks about right-sizing their business model balance sheet.
How complicated is this transaction in relation to other deals you've done?
This inherently is a branch transaction — it's a simpler deal. There are inherently fewer moving parts and pieces. … We've recently been through a branch transaction through NatCity and PNC.
We understand well how that works with recent experience. We've done other branch deals in the past as well. The fact that it is an in-market deal is kind of the overarching simplifier. We're working geographies that we know extremely well, we've known for years. We put this in the very low-risk bucket.
Are you worried about any backlash this deal might create in your hometown? You have to sell some branches and you plan to consolidate some, which means layoffs.
This is a little bit of the best of both worlds. Our home market is literally Buffalo. That is where we have the most density today. With the benefit of HSBC we'll have too much density in Buffalo, and the U.S. Justice Department will require us to divest there, where we otherwise would have closed branches. …
We're going to have to sell those branches and bring other competition to the marketplace, support and perpetuate jobs that otherwise would have been eliminated. So it's a real good outcome for the markets.
How competitive was this transaction? Was there a bidding war for these branches?
I can assure you it was competitively bid. I'm comfortable in saying it was a horse race to the finish line or a horse race to the starting line, depending on how you want to look at it.
Having said that, we were able to work within the parameters we developed a couple months ago in terms of what we thought was right with us. We were able to bid it on our terms and conditions.
This wasn't an emotional frenzy for us, but we expected it to be competitively bid. While I don't know who was bidding against us or how many — we always assumed they were players who, on one hand would be rational in how they looked at it.
And on the other hand we assumed it would be competitive. It played out pretty much as we anticipated and obviously couldn't be more pleased on the end result.
First Niagara strikes me as very confident, in tone and in strategy. How do you walk that fine line between confidence and hubris?
I'll take it as a compliment that we appear confident: we are. But we are because we have the competencies and the capacities — meaning the people and the talent — to execute and deliver.
I say to many [people] who wonder at times if we are going too far, too fast: we worked too hard through the worst times this industry has seen in a long time to get it right and do it right.
We're one of the few, one of a handful at best, that came out of this storm and are better positioned today. Not bigger, [though] we are, but most importantly we're better positioned today. We're a better organization, a stronger organization.
The last thing we are going to do is put that in harm's way, put that at risk so that we can do "the next transaction." No next transaction is mission critical to us. We're forward thinking — we're running the business today for what we want to be a couple of years from now.
I won't deny that there is a good sense of conviction — and implicit in that is some courage around this office and around this organization to play offense and play to win and keep pushing forward.
