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John R. Koelmel will receive about $3 million from First Niagara Financial Group as part of his severance package.

And the Buffalo-based bank’s former president and chief executive officer could reap much more from stock options, but only if First Niagara’s stock price increases within the next few years.

Koelmel was removed by First Niagara on March 19; the terms of his severance package were included in a bank regulatory filing on Friday. The agreement illustrates the high cost that can come with a change in leadership at a prominent, publicly traded company. First Niagara is continuing its process to choose a new permanent CEO.

Koelmel will receive a $2.86 million severance payment from First Niagara; he was due to receive about $510,000 of it by late September, and the rest in increments after that, over a period of about two years.

Combine the $2.86 million with a $204,083 incentive award he is receiving, and the total rises to $3.07 million. The incentive award was pro-rated, based on Koelmel’s annual target of $955,000.

The severance agreement also calls for Koelmel to receive up to $10,000 in reimbursement for outplacement services within 12 months of his termination date. It is unclear how much of those services he needed: Less than three months after his departure from First Niagara, Koelmel was introduced as the president of the Buffalo Sabres’ HarborCenter entertainment and hockey complex under development in downtown Buffalo.

First Niagara also said it would reimburse Koelmel $25,000 for legal fees and expenses that he incurred to review, negotiate and execute the severance agreement.

Koelmel’s separation from First Niagara could end up far more lucrative for him, but only if First Niagara’s stock price improves over the next few years. All of Koelmel’s options were converted to fully vested as of his termination date, but the vast majority of those options are worthless as of now because First Niagara’s share price is less than the price Koelmel would have to pay to exercise those options.

From 2004 to 2012, Koelmel was granted nearly 895,000 shares of First Niagara stock options, with different exercise prices and expiration dates. The shares have an average exercise price of $12.81. Some of the options are set to expire as soon as next year; the expiration date of others was changed to five years from his date of termination, to March 2018.

First Niagara’s stock closed at $10.66 per share on Friday, meaning the price would have to increase 20 percent to reach the $12.81 average exercise price of his options. The last time its stock price was that high was July 2011. Since the start of 2013, First Niagara’s share price is up about 31 percent, from $8.16 per share.

As of Friday, the only portion of the 894,825 shares that Koelmel could exercise would be for 208,413 shares, with an exercise price of $9.84 per share, giving him a paper profit of about $171,000 at Friday’s closing price. The second-lowest exercise price is $12.02, for 125,067 shares, but those options and all of the others with even higher exercise prices are worthless today because First Niagara’s current share price is lower. Some of his other options have an exercise price as high as $14.95 per share. First Niagara’s share price would have to rise by about 40 percent for those options to have any value.

Separately, Koelmel has nearly 87,000 shares of restricted stock, which are now considered fully vested, meaning he owns them outright and is free to sell them whenever he chooses. Based on Friday’s share price, those shares are worth about $927,000.

Koelmel was removed from First Niagara in a rift with its board. Friday’s regulatory filing included a letter, dated May 17, from First Niagara interim CEO Gary M. Crosby to Koelmel, saying the board “expresses its appreciation for your extraordinary contributions” during his tenure as president and CEO.

The agreement stipulates Koelmel will not make disparaging remarks about First Niagara to the media, and says First Niagara would instruct its management committee, directors and spokespersons not to make disparaging remarks about Koelmel.

The bank recently disclosed that another executive who left the company, Oliver H. Sommer, was paid $871,250 as part of his own severance agreement.

email: mglynn@buffnews.com