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Expanding First Niagara keeps WNY roots

by Allissa Kline

First Niagara Bank President John Koelmel, coming off months of positive press, makes no excuses for moving the bank’s corporate headquarters from Niagara County to Buffalo.

He doesn’t feel guilty about the impending address change and he isn’t worried about offending Niagara County loyalists.

He said the bank isn’t hung up on county lines or geographic boundaries, though it realizes some people think such lines are important. Instead, the bank thinks of itself in broader terms.

“We’re very loyal to Upstate New York and Western New York in particular, given our roots and heritage,” Koelmel said. “We want to be part of effecting change and having an impact and making the region a better place to work and live. We take that seriously, not as a cliché.”

Announced Sept. 10, the headquarters relocation will shift First Niagara’s 50-some executive team members from the company’s 76,000-square-foot Pendleton facility to the Larkin at Exchange building. The bank currently leases 64,000 square feet in the a 10-story former warehouse. Parts of two floors there are being renovated for the bank.

The Pendleton building, which is set to remain the bank’s central back-office operations center, will stay at full capacity as it absorbs new employees being hired in the wake of First Niagara’s two acquisitions in Pennsylvania, bank officials have said.

Those acquisitions – 57 former National City Bank branches in the Pittsburgh area and an anticipated 83 branches of Harleysville National Corp. in Philadelphia and eastern Pennsylvania, both marking the bank’s first operations out of New York state – are expected to generate some 300 new jobs in Erie and Niagara counties. Bank officials haven’t yet determined how many of those jobs will be based in Pendleton or Buffalo.

The bank’s assets, including its new Pittsburgh-area branches, now total $13.2 billion. It employs about 1,100 in Erie and Niagara counties and more than 2,800 people companywide.

Response to the headquarters relocation has been mixed. Some believe the leadership of the bank, which originated 139 years ago in Lockport, should remain close to its roots. Others say the decision shows growth in the region and crossing county lines shouldn’t matter.

“This is a local bank on the move, and that’s something we should celebrate,” said Molly Fitzpatrick, executive director of Leadership Niagara, a community leadership and development organization. “I think it’s something the whole region should be proud of.”

Lockport attorney George Muscato isn’t so optimistic. While he said he “doesn’t blame” First Niagara for moving headquarters to Buffalo, he does question the future of the bank in New York state against the backdrop of what he calls a “systemic problem with tax structure” in the state.

“Really, what troubles me about this is we all say that it’s great to retain the jobs in either Erie or Niagara county, but as those of us who have lived here for so long have seen, the next step is right out of the state,” Muscato said. “You’ve seen it with HSBC moving a chunk of the business elsewhere and M&T Bank, who’s been an absolute supporter of Western New York. But the taxes are so prohibitive to any kind of decent business climate that it makes incentives almost a necessary tool in order to survive in New York state.”

En route to Utica for a satellite CNBC interview about the banking industry, Koelmel talked this week about First Niagara’s relocation decision. He said the move came down to logistics.

“We’re flat out of space at the current Pendleton building,” said Koelmel, a former KPMG LLP audit partner who has led the bank for nearly three years. “The operation center (in Pendleton) will be fully staffed and unfortunately we can’t expand that. We’d have to literally build a second building. I won’t say we won’t ever do that, but right now it’s more cost-effective for us to lease additional square footage in the Larkin building than to build our own.”

Rental fees paid by the bank to Larkin Development LLC, which owns the Larkin building, could not be determined before press time.

The bank is getting some financial help with its move. Empire State Development Corp., the state’s economic agency, has awarded a $1.3 million grant based on First Niagara’s planned $6.56 million expansion project, which includes the build-out at the Larkin building, according to ESD local spokesperson Katie Krawczyk. Those funds will help pay for a portion of furniture and fixture expenses at both the Pendleton and Larkin facilities, and monies will be dispersed in 25 percent portions as long as the company meets certain investment and employment benchmarks, she said.

Accepting the ESD grant means the bank must maintain a certain employment level here for at least two years after the last of the funds are dispersed, which should be by 2013, Krawczyk said.

Koelmel has close ties to some Buffalo-centered organizations, including Buffalo Place Inc. which he serves as treasurer. He also sits on the board of the Buffalo Niagara Partnership. He said neither of those agencies influenced the decision to relocate headquarters.

“We worked with ESD, who played a very active role in the discussion, and we obviously worked with the mayor’s office,” Koelmel said. “Beyond that, this was all a function of First Niagara working with (Larkin Development) to put it together. Those guys are the real heroes in making investments and affecting change.”

He said the bank is committed to the region, including the Larkin district, which Larkin Development owner Howard Zemsky plans to develop into a mixed-use neighborhood. First Niagara will be involved in that conversion, but Koelmel could not elaborate on how it will invest in the project.

Having closed the National City Bank acquisition for $54 million, the bank now moves onto the Harleysville deal, which is expected to double the bank’s assets. Additional buyouts, locally or outside the state, aren’t out of the question, Koelmel said.

“We like our (Western New York) footprint and think it well-positions us to grow business and we fully accept, whether it’s in Buffalo, Upstate New York or Pennsylvania, that acquisitions can be a very productive way to increase the value of the franchise,” Koelmel said.