Sources familiar with the situation say the move by the bank's board has been brewing for about a week, and officials were particularly busy over the past weekend, in preparation for the board meeting. However, pressure has been building on Koelmel and the board for over a year from shareholders who are unhappy with the bank's stock price over the last two years.
Bank officials and Connors stressed that Koelmel was not fired for cause and there are no issues of ethics or misbehavior involved, nor did personal health play any role.
But Koelmel and the board have been roundly criticized by shareholders for pursuing costly growth at the expense of shareholder returns, and Koelmel has found himself frequently on the defensive about making too many deals and paying too much for them. It's acquired five banks since 2007.
In particular, the bank has been under fire since it announced its acquisition of 1 million accounts from HSBC Bank USA in August 2011, including 195 branches and $15 billion in deposits across upstate New York. That deal, while it catapulted the bank into the top ranks across every market of the state, suffered heavily from bad timing, as the purchase was unveiled just one day before the crisis over the U.S. debt ceiling. A week later, the Federal Reserve announced it would keep interest rates low for at least two more years.
As a result, the stock market tanked immediately, bringing bank stocks in particular with it. First Niagara was hammered for being on the offensive instead of the defensive. Its effort to raise more than $1 billion in additional capital wound up costing it, and shareholders, much more than originally planned. And it wound up selling the 64 branches to KeyCorp, Community Bank System and Financial Institutions for less than expected.
Over the next few months, the bank's shares plunged from just about $14 per share to just about $8 per share and, after a brief surge, fell again to as low as $7.50 last year. They had peaked at more than $16 per share in 2003 and again in late 2008. As of Tuesday, shares closed at $8.44, down six cents for the day.
The bank completed the HSBC purchase and says it has successfully integrated the branches, customers and employees.
Koelmel and others have publicly and repeatedly asserted that it has stopped its acquisition binge to focus instead on efficiently and effectively running what it has, making sure it can grow internally and be more profitable with its existing customer base. It will report first-quarter earnings on April 19.
"We are committed to maintaining our position as a leading independent banking organization with a deep-seated focus on service to our customers and communities and to building value for our shareholders," Bowers said.
The board felt the bank's need to change direction from acquisition mode to regular day-to-day operating mode also needed a leader with different skills, sources said.
"There are growers and there are nurturers," one source said.
"I do think John grew the bank in ways that were almost unimaginable at the time, and I think he was ideally skilled at that, and I think the bank will reap what he sowed for decades to come," said Howard Zemsky, who has worked closely with Koelmel and First Niagara in developing Larkinville, where the bank moved its headquarters. "I think after that much acquisition, I think it's also appropriate for the bank to focus on organic growth and digesting all those acquisitions. I think there was a very mutual understanding that, given the bank's direction, this was an appropriate time to change leadership."
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