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What Was Behind CEO's Ouster At First Niagara Bank?

11:07 PM, Mar 20, 2013   |    comments
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Buffalo, N.Y. - "I'm a pedal to the metal kind of guy," former First Niagara Bank CEO John Koelmel told 2 On Your Side in 2009.

Koelmel was intent on turning the sleepy former Lockport Savings Bank into a major regional player.

And he did just that buying a number of banks in the Northeast and quadrupling First Niagara in size.

First Niagara's buying spree culminating in the summer of 2011 with HSBC branches.

At the HSBC announcement, Scott Brown asked Koelmel about all that.

Scott Brown (2011): "This is your fourth major acquition in the last three years, is there a concern about growing too quickly, too fast?"

John Koelmel (2011): "This responder- clearly not."

But since 2009, the bank's stock had lost nearly half of its value.

Paul Davis, an editor with American Banker, a newspaper that covers the financial industry, says Koelmel's ouster from First Niagara was likely based on the bank's bottom line.

Paul Davis: "Last month they announced plans to reduce their annual expenses by about $40 million. That's an acknowledgement that they're just spending too much money for a company of their size."

Scott Brown: "Do you think they were growing too quickly?"

Paul Davis: "That is certainly a valid point. If you look at it since 2010 they had purchased two banks and then this purchase of HSBC branches, that's a challenge for any management team, a challenge in particular for a company of First Niagara's size, how much they've grown in just the last four years."

In terms of the actual timing of Koelmel's ouster, the move comes about a month before the bank's annual shareholders meeting in Buffalo.

Paul Davis: "I'm assuming this shows shareholders that members of the board are taking their concerns seriously and that the board is willing to make changes if necessary to protect shareholder value. I mean it certainly can't be overlooked as a reason for the move."

And in a message to its investors Bank of America/Merrill Lynch said:

"Though admittedly the stock remains very much a "show me" story at this point, the announcement is further evidence the Board is entering 2013 having gotten the message from investors."

The bank declined our request for an on camera interview but in a statement said:

"This announcement involves a leadership change only and has no impact on the day-to-day operation of our business."

First Niagara's stock was up by about four percent on Tuesday.

The bank has named one of Koelmel's top lieutenants, Gary Crosby as the interim CEO.

According to a federal filing, Crosby will receive a one million dollar payment when his interim status ends. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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