Early last month, Buffalo, N.Y., area-based First Niagara Financial won a bid to buy 57 of the 61 National City branches in Western Pennsylvania that National City's new owner, PNC Financial Services Group, was forced to sell to settle antitrust concerns.

(Four branches, in Crawford County, went to two other banks. PNC was allowed to keep roughly 110 National City branches in the region.)

The acquisition, expected to close Labor Day weekend, would instantly vault First Niagara to the third-biggest retail bank in the Pittsburgh region behind PNC and Citizens Bank.

First Niagara CEO John Koelmel, 56, was in town yesterday to discuss the deal:

Q: Talk about how the deal for the National City branches came about.

A: For us it really started the end of October, the day PNC announced the transaction (to buy Cleveland-based National City). The presumption was that PNC was going to have to shed themselves of some number of branches.

Frankly, it was presumed in the early going that there would be significant and very competitive interest for the branches. So by the time the formal process was rolled out at the end of December, there were mixed reviews and perceptions as to what the likelihood of success would be for us.

Clearly (we) loved the opportunity. We had long looked at Pittsburgh and Western Pennsylvania as a likely next move for us.

We submitted an initial preliminary bid. From that, PNC came up with a short list of what I'll call semi-finalists. I'm not sure how many were in the pool at that point.

Q: Do you know who any of the other bidders were?

A: No. Still don't to this day know who we were competing with, or how many.

It wasn't until we made the semifinal round that we were able to come to Pittsburgh and do the more traditional diligence: meet the people, look at the locations, etc.

Negotiations then took on more focus. I can only believe they were negotiating with multiple finalists at that point.

That carried out into the early part of March. The final bid (was submitted) around the first of March.

The Department of Justice in effect interviewed us to ensure we could bring to the market a good quality array of products and services, that we had the capacity, the competencies to compete effectively against PNC in the market at large.

April 7 is when we finally got official notification that the agency review had been completed and sign-off had been obtained.

Q: As you know, one independent banking analyst has complained to the U.S. Justice Department that PNC may have chosen First Niagara over higher bidders to minimize competition, believing that First Niagara wouldn't pose as big a threat as some larger rivals. Is there any truth to that?

A: My only editorial comment there is you have to appreciate that it's Justice and the government that weighed in heavily here and what's incumbent on them is to ensure they are bringing the appropriate competition to the marketplace.

We are more than comfortable we can compete. We compete against a lot bigger organizations than PNC, frankly, and do it very effectively.

Q: This is your first acquisition outside of First Niagara's home state of New York. How will you compete with all of the more established players here?

A: We've competed against the more established players every time we've stretched our wings.

What's far more relevant is we are coming to town with a strong story.

We are literally in a unique position today. There is no one in the banking business that can sit today and talk about what we have, which is a strong balance sheet, great capital position, strong operating performance, a very nice transaction that strategically enhances us, and significant infusion of new capital. Nobody has that.

We compete against HSBC, Bank of America, Key, Citizens, all of whom are bigger than PNC, every day. Our focus and our success is a function of how effective we are against larger, high-quality competition.

Q: Give us some examples of what you do differently and how you compete with the big guys.

A: It's pretty simple. We bring everything they bring, but do it in a way that is much more focused on you, the customer. Much more focused on knowing the markets, making decisions, most notably in-market.

Q: When First Niagara takes over, what changes will customers notice?

A: Other than the obvious new signs on the doors, I have every expectation that they probably are already beginning to notice a much more energized work force.

In terms of products and services, I expect that will be effectively seamless.

Q: Will customers have to go through the hassle of filling out paperwork to open new accounts?

A: No. What they will need to do is make sure they open their mail and take out their new debit cards and take out their new checks. All that will be provided.

Q: First Niagara is required to honor existing rates on National City's certificates of deposit until the maturity date. After that, anything goes.

And it appears that former National City customers will be in for some rate shock. In a government filing, First Niagara said it plans to lower deposit rates so they are "more consistent" with competing banks in the region.

That doesn't sound like the best way to keep customers happy. Can you explain?

A: We're more than competitive with the rates we pay. Nat City had to protect its liquidity and funding by paying up for deposits. All we are saying is that ... we are not going to pay up to retain deposits.

We are a relationship-focused bank. We are not out to attract hot money by paying up for it. The good news is, in this market we don't see PNC doing that either.

If you are in the market for a high rate, to date you've had National City to look to. Going forward, I readily acknowledge First Niagara will not be there with an inordinately high rate. The punch line is, though, neither will anyone else.

Q: You have said that you will retain all National City branch employees and hire some 50 to 75 more people in the Pittsburgh market. What kinds of jobs will be available and when will you begin hiring?

A: It's already begun. We will add more people in the branches. We are going to add to the lending team. And we are going to add to the team that directly supports them.