CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC INTERVIEW WITH FIRST NIAGARA PRESIDENT & CEO, JOHN KOELMEL, ON CNBC'S "POWER LUNCH" TODAY

WHEN: Today, Wednesday, October 22nd at 1:15 PM ET

WHERE: CNBC's "Power Lunch"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with First Niagara President & CEO, John Koelmel, on CNBC'S "Power Lunch" Today.

All references must be sourced to CNBC.

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DENNIS KNEALE: FINANCIAL GROUP POSTED EARNINGS OF 22 CENTS A SHARE. GROWTH OF 12% VERSUS A YEAR AGO QUARTER.HERE TO TELL US ABOUT THE EARNINGS AND GIVE US HIS TAKE ON THE CHALLENGES FACING BANKS, WE HAVE THE CEO JOHN KOELMEL PRESIDENT AND CEO OF FIRST NIAGARA. JOHN HILSENRATH [WALL STREET JOURNAL CORRESPONDENT]IS HERE WITH US AS WELL. THANKS FOR BEING HERE. CONGRATULATIONS ON YOUR EARNINGS. REALLY NICE NOT TO SEE LIKE $10 BILLION TO $20 BILLION IN CHARGES. A LOT OF PEOPLE THINK THE NEXT THING THAT'S GOING TO HAPPEN IS THE BIG BANKS ARE GOING TO LOOK TO BUY THE HEALTHIER LITTLE REGIONAL BANKS. ARE YOU GOING TO BE SOMEONE WHO SITS AT THE TABLE AND GOBBLES UP SOMEONE ELSE? OR ARE YOU GOING TO GET EATEN?

JOHN KOELMEL: WE'RE DEFINITELY IN THE GOBBLER CATEGORY THERE. WE'RE LOOKING TO ENSURE, YOU KNOW, WE FURTHER THE PATTERN THAT WE'VE CREATED OVER THE YEARS AND LEVERAGE THE STRONG POSITION WE'VE GOT TODAY TO MAKE SURE WE'RE ON THE ACQUIRER NOT THE ACQUIREE SIDE.

KNEALE: IF YOU DID THIS WOULD IT BE MORE LIKE CASH RATHER THAN STOCK BECAUSE ALLL STOCKS SEEM TO BE WAY DOWN, RIGHT?

KOELMEL: I THINK IT'S GOING TO BE DIFFICULT TO REALLY PREDICT EXACTLY HOW DEAL STRUCTURES WILL GET PUT TOGETHER. THERE'S NO QUESTION THERE'S GOING TO BE A HEAVY EQUITY COMPONENT NO MATTER WHAT KIND OF DEAL WE PUT TOGETHER. BUT HAVING THE AVAILABILITY OF CASH, WHETHER IT BE OFF OUR RECENT CAPITAL RAISE OR POTENTIALLY THROUGH THE GOVERNMENT CAPITAL AND A PROGRAM THAT THEY'VE GOT ON THE TABLE NOW.

MICHELLLE CARUSO-CABRERA: ARE YOU APPLYING?

KOELMEL: WE'VE GOT TO FIRM UP OUR DECISION PROCESS ON THAT, BUT WE'RE TAKING A REAL HARD LOOK AT IT. IT'S CERTAINLY VERY LOW COST, NICE CAPITAL TO HAVE, CAPITAL THAT WE CAN RAISE IN TERMS THAT ARE CONSISTENT WITH ALL OF THE BIGGER GUYS. SO WE'RE TAKING A VERY HARD LOOK AT IT.

KNEALE: AND NO PROBLEMS IN LIMITING YOUR SALARY? ANYTHING LIKE THAT?

KOELMEL: WON'T HAVE ANY PRACTICAL CONSTRAINTS. OUR BUSINESS PRACTICES HAVE BEEN VERY MUCH IN ACCORDANCE AND CONSISTENT WITH THE PARAMETERS THAT ARE PUT FORTH IN THE REGULATION. THERE'S NO REAL SIGNIFICANT RAMIFICATIONS THERE. AND FRANKLY, ALL OF THIS YOU HAVE TO LOOK AT IT FOR THE GREATER GOOD OF THE SHAREHOLDER.SO VERY COMFORTABLE WITH THAT KIND OF ANALYSIS.

JOHN HILSENRATH: HEY JOHN, THE GOVERNMENT IS NOW MASSIVELY INTERVENED IN MONEY MARKET FUNDS, IT'S ABOUT TO START A COMMERCIAL PAPER PROGRAM, THERE'S THESE BLANKET DEBT GUARANTEES. WHAT KIND OF UNINTENDED CONSEQUENCES SHOULD WE BE LOOKING FOR IN TERMS OF HOW THIS IS GOING TO CHANGE THE BEHAVIOR, NOT ONLY OF BANKS BUT OF THEIR CUSTOMERS?

KOELMEL: THERE'S NO QUESTION, BEEN VERY CONCERNED AS TO HOW MANY OF US ARE GOING TO BE DISADVANTAGED FROM THE OUTCOMES OF THE VERY TYPES OF PROGRAMS YOU'VE REFERENCED. AND I THINK GOVERNMENT NEEDS TO BE CAREFUL THAT THEY DON'T GET TOO FAR DOWN A SLIPPERY SLOPE HERE AND LET THE FREE MARKET SYSTEM PREVAIL. I THINK CONSUMERS ARE PROGRESSIVELY TAKING A LOOK BEHIND THE INSTITUTIONS THAT THEY DO BUSINESS WITH AREN'T JUST FOCUSSED ON RATE. OBVIOUSLY GOVERNMENT GUARANTEES GO A LONG WAY TOWARD ELIMINATING THAT CONCERN OR CONSIDERATION FOR THEM. MUCH RATHER SEE US COMPETE ON OUR STRENGTH AND OUR ABILITY TO PROVIDE QUALITY OF SERVICE FOR OUR CUSTOMER AS WELL AS A FAIR RETURN.

CARUSO-CABRERA: SIR, HOW MANY MORTGAGES HAVE YOU WRITTEN SINCE LEHMAN COLLAPSED? HOW MANY BUSINESS LOANS HAVE YOU EXTENDED?

KOELMEL:I CAN'T QUANTIFY THAT SPECIFICALLY FOR YOU. BUT WE'VE BEEN OPEN AND ARE IN BUSINESS EVERY DAY. OUR PORTFOLIO CONTINUES TO GROW. WE CONTINUE TO ORIGINATE FOR BOTH THE BENEFIT OF OUR RESIDENTIAL AS WELL AS OUR COMMERCIAL CUSTOMERS. IT'S BEEN VERY, VERY CONSISTENT FOR US.

KNEALE: AND WHEN I DO GET A MORTGAGE FROM YOUR BANK, ARE YOU TAKING THAT MORTGAGE AND PUTTING IT INTO A PACKAGE AND SECURITIZING IT AND SELLING IT OFF? OR ARE YOU KEEPING IT THERE AT YOUR BANK AND COLLECTING MONEY FROM IT?

KOELMEL: WE'VE LONG HAD A PRACTICE SPECIFIC TO OUR INSTITUTION IN NOT PORTFOLIOING LONG-TERM PRODUCT. AND IN A PURCHASE MARKET SUCH AS THIS, IT'S PREDOMINANTLY LONG-TERM 30-YEAR FIXED RATE PRODUCT.SO WE'VE NEVER PORTFOLIOED THAT. SO WE OFFLOADED ON BALANCE SHEET. BUT THAT'S A BALANCE SHEET MANAGEMENT STATEGY.

CARUSO-CABRERA: ONE YEAR AGO WERE YOU WRITING MORE LOANS, LESS LOANS OR IS IT THE SAME?

KOELMEL: WRITING MORE LOANS TODAY THAN WE WERE A YEAR AGO BY FAR.

KNEALE: THANK YOU.





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