By ALLISSA KLINE
akline@bizjournals.com | 716-541-1612

First Niagara Bank, fresh off a series of acquisitions and working on yet another, is one of several Western New York banks sharpening its focus on federally backed loans to small businesses.

The fast-growing Buffalo bank, which now operates in four states, approved $7.6 million in U.S. Small Business Administration 7(a) loans in the Buffalo District during fiscal 2011 and $26 million 7(a) loans companywide, according to new SBA loan figures. Next year, First Niagara hopes to approve between $40 million and $50 million in total 7(a) loans, though the number of actual loans approved may not increase, according to the bank's new SBA department manager.

"What we envision doing in fiscal year 2012 is different from what we just closed out on for fiscal year 2011," said Christopher Earle, who joined the bank from NewAlliance Bancshares, a Connecticut bank that First Niagara acquired in April. "We're trying to do larger SBA loans. We're not turning a blind eye to smaller loans ... but the fact is that we're trying to affect larger products. And we're trying to increase the average loan size because that will have a bigger impact on our communities."

September marked the start of First Niagara's re-emphasis on SBA loans - both the flagship 7(a) loans, geared toward startup and existing small businesses, and 504 loans, used to provide long-term, fixed-rate financing to small businesses for the purchase of large assets. Previously, the bank viewed SBA lending as an "adjunct" to commercial lending. Now it has placed five regional SBA relationship managers throughout its franchise, including one that serves the Buffalo-Rochester market, Earle said. The team is reaching out to local SBA district offices and business development centers to draw referrals.

Overall, the SBA's Buffalo District Office closed fiscal 2011, which ended Sept. 30, with 804 7(a) loans totaling $136 million to businesses in its 14-county service area. It approved 58 loans under the 504 program, for a total of $37.4 million. Locally, M&T Bank approved the most SBA loans for the year - 150 7(a) loans for $29 million - marking the 17th consecutive year it has ranked No. 1 among local SBA lenders.

"This has really been our core DNA of banking since we started" as an SBA lender, said Al Luhr, M&T's senior vice president for Western New York business banking. "We try to be consistent. We try to be out there."

That's just what Evans Bank and KeyBank are trying to do. Both institutions heavily increased the number of 7(a) loans approved and total dollars approved for fiscal 2011. Evans approved 57 7(a) loans, up from 42 in fiscal 2010, representing a 35.7 percent increase. Dollar totals rose from $8.9 million to $11.1 million, up 24.7 percent.

The Angola bank, which is targeting the Northtowns for expansion, made a commitment in 2009 to do more commercial and industrial lending than it had done previously, according to John Eagleton, chief commercial loan officer. He said it has hired six new lending personnel, and it may hire two more within weeks, to handle the additional workload.

Right now, about 10 percent of the bank's total commercial loans are SBA loans and that percentage is expected to rise, Eagleton said.

KeyBank saw an even greater increase in local SBA lending. In the Buffalo district, just 11 7(a) SBA loans totaling $2.5 million were approved in fiscal 2010. In 2011, the number rose to 31 7(a) loans totaling $3.8 million.

The bank recently committed to lending $5 billion to small businesses, so next year's SBA loan numbers should rise, said John Moshier, senior vice president and KeyBank's national SBA manager. Like First Niagara and Evans, KeyBank has also hired additional staff to support its SBA portfolio.

"This really allows us to have more tools to provide capital to some borrowers that may not be eligible for conventional lending," Moshier said.

"We're a steady performer in the SBA arena and we've been a top 20 lender for the past 15 years," he said. "We're not the biggest bank, but we're always going to strive to achieve something bigger than our market share."