Executives of First Niagara Financial Group admitted to shareholders Wednesday that the performance of the bank and its stock price has fallen short, particularly related to the HSBC Bank USA branch purchase, but they reiterated a commitment to improve value and returns for investors.
Speaking at the bank’s annual shareholders meeting, Board Chairman G. Thomas Bowers noted the bank’s accomplishments in the past year, including its acquisition of HSBC branches with 1 million new customers and 1,200 employees. He also cited strong loan growth on both the retail and commercial sides that is “well ahead of our peers.”
But he also said a tough business climate, such as continued low interest rates, overshadowed the bank’s “otherwise strong business fundamentals” and “the strategic value” of the HSBC deal.
He acknowledged investor frustration, adding that “while we are proud of these accomplishments and our strong business fundamentals, they have not been reflected in our share price over the past two years.”
“As board members, and shareholders ourselves, we fully realize that it is our responsibility to represent the interests of all shareholders, and we work hard to ensure we fulfill this duty,” Bowers said.
In particular, bank officials said they will seek to get the most out of First Niagara’s operations and customers, bringing in business through basic sales and generating a lot of new loans.
And officials will focus on being more efficient and lowering costs during the course of the year, even while investing in operations to serve customers.
“Our resolve today is stronger than ever to deliver enhanced value to our shareholders by capitalizing on the strong foundation that we have built,” Interim CEO Gary Crosby said.
Crosby also stressed that “we are done acquiring for a while” – the latest effort by leadership to quash remaining Wall Street worries that the acquisitive bank is still on the hunt.
He acknowledged that “our rapid growth into one of the top 25 banks in the country has created some growing pains.”
But, he said, “being an optimist, I see these growing pains as real opportunities to improve our profitability and shareholder value.”
Crosby, the bank’s former chief operating officer, was named temporary CEO last month after the sudden departure of longtime CEO John R. Koelmel in what both he and the bank called a “mutually agreed-upon” decision. Bowers said it was “natural that we re-examine our leadership structure,” as the bank “transitions from acquired to organic growth.”
“The board really felt that the change in direction was significant enough to transition at the highest level,” he said. “John was an acquisitive CEO with a wonderful track record of building this franchise. We need a seasoned operator.”
The bank has launched a national search for a new CEO and hired recruiter Korn/Ferry to help. The process will be led by a board committee led by director Nathaniel Woodson.
Crosby said in an interview he does not want the top job, though he is enjoying it.
“I’ve only been on the job a month, and already we’ve had a 52-week high [stock price],” he joked.
He noted that he’s not just there to keep the seat warm, either.
“My mandate is to be more than just the caretaker of our organization; it is to accelerate progress on key strategies … the opportunities that we have identified to deliver improved profitability,” he said.
In particular, the bank will strive to be “operationally efficient in all that we do,” Crosby said.
Officials will also seek to redeploy its vast cash from its unusually large investment portfolio – amassed because it acquired so many deposits in recent deals – into more profitable loans, though Crosby admitted in an interview that that will likely take several years to accomplish, given the slow economy.
“Such growth has never been, nor will it ever be, at the expense of prudent credit underwriting,” he said. “We will continue to pursue only quality loans.”
For the second straight year, executives were on the defensive. Shareholders peppered them with questions about the stock price, dividend cut and failure to generate results.
“You didn’t slash the executive salaries,” one investor said. “You only slashed ours.”
Officials accepted the criticism.
“We certainly hear you, and we’re going to do our very best to concentrate on shareholder value,” Bowers said.