If First Niagara Financial Group took out a help-wanted ad for its chief executive officer position, it might look like this:
“Buffalo-based firm seeks experienced executive to run and grow – but not through more acquisitions – a business employing 6,000 people in several states, including 2,200 in Western New York. Job is high-profile and high-paying and has gained prominence with the firm’s rise far beyond its upstate roots.”
The First Niagara CEO’s job suddenly became available in mid-March when John R. Koelmel, the charismatic builder of the bank, and the board parted ways. The outcome of the job search will set a new direction for First Niagara after a flurry of acquisitions fueled a jump in employment, office space and branches.
The results will also be closely watched in the community. The bank’s corporate headquarters has become a major employer and an important part of the local business scene, building on a foundation that dates to its origins as Lockport Savings Bank.
Wall Street will be watching too, eager to see if the company’s stubborn stock price will start climbing.
First Niagara is considering external and internal candidates. G. Thomas Bowers, the board chairman, has said First Niagara wants someone who is a “seasoned banker with a proven record of strong organizational and operational leadership.”
The wish list favors an operator who can capitalize on what First Niagara has amassed. The firm has been trying to assure Wall Street it is committed to that path, rather than expanding via more deals.
Will First Niagara promote from within, or go with an outsider? Could a local executive from a competing bank be recruited to take the job?
Gary M. Crosby, First Niagara’s executive vice president and chief administrative and operations officer, is serving as interim CEO, but has indicated he is not interested in the position long term. But the bank has not stumbled under his watch, and he is well respected in the community, so he must still be considered a candidate.
If the board looks internally, two other First Niagara executives who could be in the mix: Daniel E. Cantara III, the chief banking officer, and Gregory W. Norwood, the chief financial officer. First Niagara recently promised temporarily enhanced severance benefits to them, in case one – or both – is terminated within one year of a new CEO taking over. (First Niagara did not make them available for interviews for this story.)
Cantara, a local native, has climbed the bank’s ranks. He joined First Niagara in 2001 and was promoted to his current job last December. Norwood was hired two years ago, and has a diverse resume, having held previous jobs with Ally Financial, Wachovia, Bank of America and KPMG.
Whoever gets the CEO’s job will lead a First Niagara dramatically different from December 2006, when Koelmel was named acting CEO.
In December 2006, the bank had $8 billion in assets and $5.6 billion in deposits, a network of 120 branches across upstate New York. Today, it has $37 billion in assets, $28 billion in deposits and nearly 430 branches in four states. It ranks as a top 25 U.S. bank by assets and market capitalization.
First Niagara has been a potent force in the growth of Larkinville, by adding jobs and office space, and it enhanced its name recognition by paying for the naming rights to what used to be HSBC Arena. Koelmel was visible in roles beyond his bank duties, serving on boards of the New York Power Authority and Kaleida, and supporting events like the Empire State Games.
First Niagara’s CEO job pays well: Koelmel was set to make a base salary of $955,000 this year, according to documents filed with the Securities and Exchange Commission.
Casting a wide net
The bank’s broader geographical scope presumably would make the CEO job appealing to a wider group of candidates.
“The CEO position is incredibly attractive,” said Randy Strauss, whose executive search firm has recruited a number of people to work at First Niagara. The bank has grown far beyond its roots as Lockport Savings Bank, into a regional operation with wider recognition and stature, he said.
First Niagara’s board has formed a search committee, led by director Nathaniel Woodson, and hired Korn/Ferry International, an executive recruiting and search firm, to help.
The task for a firm like Korn/Ferry is to identify and research prospects, narrow the list of interested candidates to perhaps three to four for the board to consider, and to conduct background checks, said Donald Cunningham, president of BancSearch, an Oklahoma-based executive search firm that is not involved in First Niagara’s CEO search.
A CEO search typically takes one to three months, depending on how quickly good candidates for the job emerge, Cunningham said.
Bank executives who come up through the commercial side of a bank often have an inside track for the CEO’s job, based on the revenues generated by that segment, he said.
A search firm helps the board identify prospects from outside the bank, typically from banks either the same size or larger. But Cunningham said the search firm also gives the board a fuller picture of internal candidates: board members may be accustomed to working with the CEO and may not be as well acquainted with other executives, he said.
If First Niagara wants to affirm a change in course – toward operating over acquiring – does that mean an internal candidate associated with Koelmel’s tenure have a harder time getting the job? Joseph Fenech, an analyst at Sandler O’Neill Partners, downplays that idea.
The most important thing for First Niagara, Fenech said, is to find a candidate who can pull together everything that has been acquired and run it effectively. “If that person comes from the inside, so be it,” he said.
Fenech said he expects the board will want to work closely with whoever is chosen as CEO, which could point toward choosing someone from within the ranks. “I’m not sure this board is going to be anxious to turn the keys over to a high-profile outsider.”
Changing CEO again
Candidates will surely know the situation they are walking into.
First Niagara’s performance has been heavily scrutinized by Wall Street. Its stock closed at $8.44 per share on Nasdaq the day Koelmel’s removal was announced in March, and closed at $9.86 on Friday.
And First Niagara’s board has changed the CEO twice in less than seven years. In late 2006, Paul J. Kolkmeyer was removed, and Koelmel, then the CFO, replaced him. A board with almost all new members then oversaw Koelmel’s departure.
First Niagara has made its impact felt beyond its own operations. A new report says it provided $13 million last year in community grants and sponsorships across its network. It says it received 2,130 funding requests and that it supported 1,299 nonprofit partners.
Koelmel was known for ramping up First Niagara’s local presence. Employees and local residents might wonder what, if any, impact a new CEO will have on that front, but the answer won’t come until after a new person is in place.
Andrew Rudnick, president of the Buffalo Niagara Partnership, said the top priority for First Niagara’s next CEO is being a successful banker. If he or she can achieve that task, “then the bank will flourish and the community where the bank is based will be the beneficiary.”
Under Koelmel’s leadership, Rudnick said, First Niagara blossomed into a major local employer and active supporter of community activities. “You would hope that the next CEO would continue that.” But everything flows from ensuring the bank is on solid footing, Rudnick said.