First Niagara's Koelmel Forges Forward

NEW YORK ( TheStreet) -- Shares of First Niagara Financial Group ( FNFG) are down about 6% so far in 2011 and stock hardly reacted on Thursday after the Buffalo, N.Y.-based bank matched Wall Street's expectations with its first-quarter operating earnings of $49.8 million, or 24 cents a share.

First Niagara President and CEO John Koelmel spoke to TheStreet about the completion of the bank's acquisition of NewAlliance Bancshares last week and how the bank plans to grow over the next year.
John Koelmel
First Niagara CEO John Koelmel

TheStreet: You have doubled in size. Are you looking for more regional expansion?

John Koelmel: We have consistently indicated we have built and continue to build our organization for growth first and foremost, day in and day out as we take more market share and more share in customer wallet. We have also been clear that we want to create more density and we want to position ourselves to operate more efficiently.

So are you looking for more acquisitions?

We are certainly ready to take advantage of the right opportunity. I feel we have the right organizational capacity and competencies to continue to buy as well as build out our business. We have worked hard to put ourselves in a position so we can do that and we are confident to the extent that when the right next opportunity or opportunities surface that we can actively explore.

Which markets will you look to make acquisitions in?

We are focused on the Northeast. I think we have recently staked out a footprint that stretches from simply Buffalo to Boston down to Philly over to Pittsburgh. That footprint across upstate New York, Southern New England as well as the state of Pennsylvania is our continuing focus. To the extent that we acquire we will be deepening the presence where we already are.

How is the integration coming along?

I'll just give you a quick thumbnail on the last three. Western Pennsylvania is very much on track, even better than anticipated. We couldn't be more pleased with the team that we have been able to assemble.

In Eastern Pennsylvania it has been a little slower. Not to suggest that it has been problematic or anything but it has just taken us a little longer there to build up and build our team and reposition the organization in that market to gain the traction that we otherwise expect of ourselves. We are always our harshest critic. Most of the industry would kill for seven percent loan growth. Most of our industry can't and are not reporting that loan growth.

We are day four in New England. The initial conversion efforts this past weekend were terrific. It has been our smoothest conversion and initial integration.

What are your thoughts on the Durbin Amendment?

We are hopeful that we will have clarity sooner than not. Procedurally it will be necessary. The original deadline for the Fed to provide better definition has passed. They had previously said they would not meet that.

With the legislation being debated in Congress to delay implementation, we think it is important that a more thoughtful look is given to the impact the Durbin Amendment would have on the industry and its ability to effectively meet the needs of its customers and investors. We got out-lobbied by the retail industry a couple years ago.

Right now we need to work together to move forward in a more productive way and benefit of the consumer since we have no reason to believe that the consumer will ultimately benefit. It is still a few pennies a share to us on an annualized basis and compromises our ability to invest.

When do you expect interest rates to rise and what impact do you see on your business?

It will be a while before rates rise. They only have one way to go and that is up. It is not a question of if, but when. I continue to believe that until the economic recovery, narrowly and broadly defined, is much more stable than it is to date - rising rates on top of rising gas prices and uncertainties in the regulatory arena would compound the problem, not be part of the solution.

S&P downgraded its outlook for U.S. debt to negative. How do you think the deficit and economy will affect the banking business?

This is just one more level of uncertainty. That is a major deterrent to the economic recovery. The private sector makes it clear that there is a hesitancy and a pause to re-engage and re-invest.

When you look at the collective economic uncertainty in the political environment, who is going to do what next? What does it mean to us and the private sector? People want more specificity and need more clarity.

The free market system is used to taking some risk, but at this point it continues to be too much of a moving target and the uncertainties are getting in the way of stimulating a sustainable economic recovery.

Edited for length and clarity.

--Written by Maria Woehr in New York.

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