BY GREG BORDONARO
Nearly a year after making its first entrance into Connecticut, First Niagara Financial Group is eyeing further expansion in the state, including adding nearly a half-dozen new branches this year and beefing up its commercial and private lending businesses.
The parent company of First Niagara Bank, which pulled off one of the largest banking deals in recent years when it acquired New Haven’s NewAlliance Bancshares for $1.5 billion last April, sees Connecticut as a growth market, particularly Greater Hartford, where the bank plans to add three new branches targeting Rocky Hill, Plainville and Avon, said David Ring, the bank’s New England regional president.
“We have a strong footprint in New Haven and along the shoreline, but we are looking to expand beyond that,” Ring said.
Besides Greater Hartford, First Niagara is also targeting Fairfield County. The bank is planning to build two new branches in the Stamford area, and will also add six former HSBC branches in that region to bolster its presence in the lucrative Gold Coast market.
Another priority, Ring said in a recent interview, is building the bank’s commercial lending capacity in the state, where it occupies only a small market share right now.
Prior to being taken over by First Niagara, NewAlliance Bank, which had nearly $9 billion in assets at the time of the merger, did not have much of a middle market or private banking/wealth management business. Ring said First Niagara will use its size and leverage (it has $33 billion in assets and more than 330 branches) to grow both businesses in Connecticut, particularly underwriting deals in the $20 million to $500 million range.
“We still have a very small market share when it comes to lending in Connecticut,” Ring said. “But we are winning a lot more deals than we lose and we are growing that book of business.”
One of the concerns raised when First Niagara announced its acquisition of NewAlliance Bank was the impact the change would have on local decision making and lending. But First Niagara appears to be doing a good job appeasing its critics, including New Haven Mayor John DeStefano.
DeStefano said he likes what he has seen from First Niagara so far, adding that they have been “a more aggressive actor in the marketplace than NewAlliance.”
So far, the bank has made 2,500 loans in Connecticut worth $750 million.
“I think they’ve done a good job coming into the market,” DeStefano said. “They’ve committed a lot of resources to help spur private sector development.”
Ring said First Niagara also intends to boost its regular business and small business lending, which includes deals up to $20 million.
He said demand for loans is increasing, but so is competition to capture that business. He said community banks, which have remained relatively healthy in Connecticut throughout the downturn, have strong balance sheets and liquidity to make loans and regional and national banks are also starting to get back in the game.
“Virtually every bank is now back in business,” Ring said. “Instead of two or three banks competing for a loan like a few years ago, now it’s double that this year.” That competition is impacting both the structure and rates on loans and putting borrowers in a much better position to negotiate than they have been in recent years.
Ring said First Niagara has plenty of liquidity to make loans, despite being an active player in mergers and acquisitions in recent years.
Since acquiring NewAlliance Bank in April, First Niagara has stayed aggressive, adding small insurance agencies, including one in Norwalk, and most recently buying all of HSBC’s upstate New York branches for $1 billion.
First Niagara was forced by the Justice Department to sell a few dozen of those HSBC branches, but the deal gives the bank six more office locations in Connecticut, mainly in Fairfield County.
First Niagara chief financial officer Greg Norwood recently told analysts that the bank’s deal making will be on hold in the near term as the regional giant works to integrate all of its new additions.
Ring said the bank will listen to offers but is unlikely to pull the trigger on another deal over the next 18 to 24 months.
On the earnings front, First Niagara posted a record $173.9 million in profits in 2011, a 24 percent increase from a year earlier. Since acquiring NewAlliance, however, the bank’s stock price has fallen below $10, more than 30 percent below its closing price of $13.22 last April 15.
First Niagara is experiencing the challenges being faced by all banks including the low interest rate environment and new regulations that are cutting into profits.
Bank analyst Damon DelMonte, of Keefe Bruyette & Woods in Hartford, said the biggest challenges recently faced by the bank are the divesture of its HSBC branches and addressing capital requirements to make that deal possible. First Niagara had to raise almost a billion dollars to complete that transaction, DelMonte said.
Once that deal is closed the bank will have 430 locations, $38 billion in assets and more than 6,000 employees in New York, Pennsylvania, Connecticut and Massachusetts, meaning the next challenge will be integrating the new branches and customers, DelMonte said.
“They are kind of handcuffed when it comes to making more deals,” DelMonte said. “Their focus is on integrating and expanding the franchise and re-growing capital levels.”
In terms of talent retention, First Niagara has been tested by its competitors in Connecticut. Within months of completing its deal, for example, Rockville Financial raided the bank’s talent cupboard, stealing away eight former NewAlliance commercial bankers.
Ring said the bank has had net loan growth in Connecticut and hasn’t felt “much of an impact from people leaving.” He said they’ve also had success attracting talent from banks like TD Bank, JP Morgan Chase, Wells Fargo, Farmington Bank, and People’s United.
Ring himself, who began his career as a bank teller in high school at a People’s United office located less than a mile away from where his current executive suite is located on Church Street in New Haven, left a 15-year career at Wells Fargo and its franchise banks, to join First Niagara.
Former Farmington Bank senior commercial-loan officer John K. Jepson Jr. was also hired to oversee First Niagara’s middle-market push into northern Connecticut and western Massachusetts.
And just recently, Rich Barry, the former Connecticut president of Citizens Bank, was hired as First Niagara’s chief credit officer. He will be based out of the company’s New Haven office.
“Whenever a bank gets bought, disruption is part of the equation,” Ring said. “Some people would prefer to stay with a smaller organization or move to a different organization for other reasons. We are the beneficiary of that too. We feel like we are attracting very high quality people.”
The bank is also redeploying some of its personnel. First Niagara recently announced plans to eliminate the assistant branch manager position at many of its office locations and convert some of those positions into small business development roles.
There will be some layoffs associated with the move, but Ring said the bank still plans to get its Connecticut workforce back up to pre-merger levels. The bank has 875 Connecticut employees, compared to 902 before the NewAlliance purchase.