First Niagara Emphasizes Steady Growth in Post-Koelmel Era

First Niagara Financial Group is content to play small ball for the foreseeable future.

The Buffalo, N.Y., company ousted John Koelmel last month as its president and chief executive. Koehmel had made it very clear that he wanted to create a regional powerhouse, stringing together numerous deals to get First Niagara to $37 billion in assets.

Those days are no more, Gary Crosby, tapped as First Niagara's interim CEO when Koelmel left, said during a conference call Friday to discuss the company's quarterly results. "We remain firm in our commitment to a purely organic growth strategy," he said. The "focus is on leveraging the footprints and franchise that we have built over the last few years."

A month after Koelmel's abrupt departure, employees at First Niagara have also recovered from the initial shock to refocus on making money, executives said.

"At a very high level, people have processed through the emotional reaction to a leadership change on professional and personal level," Gregory Norwood, the company's chief financial officer, said in an interview following the earnings call. "If you look around the company, it's generally upbeat. Yes, it was uncomfortable, and now we're focused on moving forward."

The company's board disclosed that it had hired Korn/Ferry International to help it find a permanent replacement for Koelmel. Crosby declined to provide guidance on when the company could hire someone. "It would be only a guess to offer insights on how long this process might take, but know the committee is working diligently ask expeditiously," he said.

Norwood declined to say if he was a candidate for the CEO job. "I don't think anyone is talking about who is or who is not a candidate," he said. "The board has said they are looking both internally and externally."

First Niagara's first set of post-Koelmel results were less-than-impressive, but were far from a train wreck. Revenue growth slowed and mortgage banking revenue fell. But the company still managed to book more loans.

Management made it clear during the conference call that slow and steady was the preferred course of action. "Words like acceleration have [been removed] from their vocabulary," says David Darst, an analyst at Guggenheim Securities.

"Koelmel's earnings calls were always about growing faster and reaccelerating growth," Darst adds. Without Koelmel, "it's a little bit different tenor that people are going to appreciate more."

Profit rose 12% from a year earlier, to $59.7 million. The results included a $6.3 million charge to cover the departures of Koelmel and Oliver Sommer, executive vice president of corporate development. The net interest margin expanded by 5 basis points from a year earlier, to 3.39%.

The margin "came in better than we had forecast to the street," Norwood said during Friday's an interview. "We did see a decline in mortgage banking, but our decline was in line with everyone else."

Cost control will remain a priority for the company, Crosby said during the conference call. "We remain focused on tightly managing our operating expenses."

A focus on lower expenses is a welcome change, after many industry observers, including M&T Bank Chairman and CEO Robert Wilmers, panned Koelmel for overpaying HSBC for more than 100 branches.