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First Niagara Expands into New England

By Laura Schreier

When it announced it would be acquiring NewAlliance Bank, Buffalo-based First Niagara Financial Group ignited a firestorm in NewAlliance’s base of New Haven, Conn., with local officials railing against the loss of a major, hometown institution with 70 branches in the Nutmeg State.
The bad press means First Niagara will have to work a little harder to woo some Connecticut customers, said Thomas Grottke, president of Wethersfield, Conn.-based bank consultancy Norteastern Banking Services Group. New Haven, in particular, has a close-knit community of businesses, government leaders and nonprofits, he said, and they’re not happy about losing their local bank.
Further north in Massachusetts, where NewAlliance has a dozen additional branches, First Niagara is also seen as a potentially tough new competitor. First Niagara is already flourishing in the Pennsylvania market, which it entered in 2009 with the acquisition of Harleysville Group and the purchase of 57 branches from larger rival PNC Financial. In in Massachusetts, the bank’s primary obstacle is its status as a larger, mostly unknown, out-of-state bank with a name that smacks of New York, not New England.
Image Is Everything
Massachusetts-based community banks are watching for  the tim when NewAlliance locations officially  change over to First Niagara, as any bank acquisition opens a window to woo customers unsatisfied with the change.
“We’ll make ourselves a very convenient alternative,” said Dena Hall, spokeswoman for West Springfield, Mass.-based United Bank. If customers are already faced with the task of switching their credit and debit cards, their direct deposit and autodebit options and other products  when NewAlliance converts to First Niagara, they may take the opportunity to switch to an entirely different bank of their choice – and United Bank and others like it want to be ready. While United Bank can boast of its homegrown roots in contrast to First Niagara, Hall acknowledged that the much larger, $20.8 billion First Niagara has a good reputation in the industry – an assessment backed by industry analysts.
First Niagara’s executives are aware that many in NewAlliance’s footprint are fighting the image of the new bank as a “big, bad, out-of-town” institution.  Daniel Cantara, executive vice president of commercial business, touted First Niagara’s local focus and emphasis on philanthropic efforts, its big lending appetite and a structure that gives decision-making powers to local executives, not the Buffalo brass. Meanwhile, First Niagara’s presence in central Massachusetts  raises the question of whether it will use it as a jumping off point for more Massachusetts growth.
Such a strategy would certainly be consistent with recent history. Banks including Connecticut-based People’s United and Webster Bank have gradually built up branch networks in Massachusetts, both moving into the Boston area in 2010.
First Niagara, too, has grown aggressively in recent years. Its entry into the Pennsylvania market in 2009 has resulted in a thriving new market for the bank, Cantara said, and although New England may be different competitive and cultural terrain, good banking values are popular everywhere. “Businesspeople are businesspeople, consumers are consumers,” he said.
Fertile Ground
Despite its recent flurry of acquisitions, analysts said they did not believe First Niagara would continue its recent habit of multiple, large purchases in the near future.
“Now’s the time for them to pause and reconsider where they’re at,” said Thomas Alonso, senior banking analyst with investment bank Macqaurie. First Niagara moved quickly in 2009 and 2010 because it sensed a good buying opportunity, he says,  but will  likely refine its business over the next few years instead of adding to it.

Collyn Bement Gilbert, an analyst at national investment banking firm Stifel, Nicolaus & Co., also said the bank was likely to focus on pumping up its brand image in its new turf. “I don’t think [First Niagara] is going to go on a mad rampage of acquiring banks,” she said.
The institution did well for itself in Pennsylvania, and its service and products had a “top-notch” reputation, which should go a long way toward reconciling New England customers to the newcomer. Ultimately, customers want a bank that will service their needs – if it happens to be based in Buffalo, so be it, she said.
Cantara, however, confirmed First Niagara’s interest in growing further in Massachusetts. While it will watch for merger opportunities, for the moment it plans to build upon NewAlliance’s current commercial banking operations. First Niagara currently seeks to hire more commercial lenders to stake out business toward the lucrative eastern Massachusetts and metro New York markets, which includes Fairfield County in Connecticut.
“We look at new England as a very fertile opportunity,” he said.
The name “First Niagara,” referring to a landmark widely associated with upstate New York, will stick for now, Cantara said. Market research has shown that residents outside New York tend to think of the moniker as reflective of the strength and power of the falls, rather than their specific location.
That being said, Cantara noted, the bank is willing to be flexible as it moves into new markets.
First Niagara has already begun fighting its outsider status by meeting with local and nonprofit leaders in its New England footprint. Cantara said the retail side of the business would soon implement a major public relations push to familiarize New Englanders with their newest banking option.
When the transition finally happens, he said, “We want it to be as much of a non-event as possible.”

Laura Schreier is a staff writer at  Banking New York.

Posted on Thursday, April 14, 2011 (Archive on Wednesday, July 13, 2011)
Posted by Scott  Contributed by Scott


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