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The bank, once a place in the business district where customers went to conduct financial transactions, will be everywhere in 2000.

Customers can now transfer money over the telephone, pay bills on their computer and get cash at the nearest automated teller machines.

Buffalo-based M&T Bank Corp. operated 111 cash machines five years ago. Today the bank has 462 ATMs. The bank's plan for 2000: even more ATMs.

M&T launched an Internet banking service in late 1999 and quickly signed up 10 percent of its checking account base in the first three months. HSBC Bank USA will launch its Internet banking product this year.

Internet banking is quickly gaining acceptance. Enrollment in Key Bank's Web-based banking service quadrupled between October 1999 and this month. Ten percent of Key Bank's customers now also use Web banking.

"The customer familiarity is really growing, so I would expect that to continue to be a rapid rise," said Marsha Henderson, Buffalo District president for Key Bank. "We all know everyone is time-starved today, they want convenience, and we're happy to give that to them."

More than 60 percent of all banking transactions at Key Bank in 1999 were conducted outside branches.

Branch offices changing

The shift of transactions away from branches, plus a decadelong population decline, leaves Western New York with a glut of excess branches. The closing of local branches will likely continue in 2000.

Chase Manhattan Bank got out of retail banking in upstate New York last year, selling 29 branches to M&T. Then M&T began eliminating a portion of its 280-branch network, announcing plans to close seven Buffalo-area branches.

M&T will likely proceed with more branch closings in 2000 and could be joined by other banks that seek to reduce branch capacity.

The remaining bank branches are transforming into financial planning centers. The financial services modernization act passed in 1999, allowing banks, securities dealers and insurance companies to buy each other, means that trend will probably accelerate in 2000.

Banks plan to provide all the financial products a family needs, which will allow them to increase profits by cross-selling products to existing customers, rather than relying solely on bringing in new customers. Local consumers can expect more sales pitches for new products from their bank through the mail and on the phone.

Twenty years ago, customers went to a bank to deposit a check. In the new era of banking, customers will go to the bank for advice on allocating the assets of an individual retirement account. Most Americans did not need such retirement planning in the past, because workers stayed with the same company for 40 years and retired with a pension.

Interest rates on the rise

The core banking business of paying interest on deposits and collecting interest on loans probably will not change much in 2000. Interest rates rose slowly in 1999 and will probably continue rising in 2000, with the Federal Reserve expected to bump rates up at its meeting next month.

Gary Paul, senior vice president at M&T, is predicting two one-quarter percentage point rate increases from the Fed this year. He expects interest rates on bank deposit accounts and loans to rise early in the year, and then stabilize late in the year.

"I think the early part of the year will be a good time to lock in deposit yields," Paul said.

Area banks are growing

Buffalo continues to be a good town to have a banking career. HSBC, which is headquartered in London, dramatically expanded its U.S. presence last year by acquiring Republic New York Corp. HSBC now has the 10th-largest U.S. bank by asset size.

M&T also continues growing through acquisition and is now the nation's 33rd largest bank. Five years ago, M&T had 1,930 employees in downtown Buffalo and the bank now has almost 2,500 jobs downtown.

Even Lockport Savings Bank, a small community bank, is branching out dramatically and changing its name to First Niagara Bank to project a regional image. The bank will close on acquisitions this year of the three-branch Cortland Savings Bank in Cortland and Albion Federal Savings and Loan Association in Albion.

Western New York also continues benefiting from the growth of banks headquartered outside the area. Fleet Bank is adding 110 jobs at a collections center in West Seneca following a 1999 merger with BankBoston.

Bank of America, headquartered in Charlotte, N.C., opened a 130,000-square-foot mortgage service center in Amherst last year and could add between 140 and 300 jobs.

The most vulnerable local banking employer in 2000 appears to by KeyBank. The Cleveland-based bank has announced plans to eliminate 11 percent of its work force to improve earnings and boost its sagging stock price.

"There are some strategic things the company is continuing to decide on and we can't yet comment on the impact of that locally," Henderson said.

The stock of KeyCorp, the parent company of KeyBank, plunged 35 percent in 1999. The cheap price could make Key an acquisition target in 2000, with potential buyers rumored as Cleveland- based National City Corp. and San Francisco-based Wells Fargo & Co.

Mergers to accelerate

Bank merger and acquisition activity slowed in 1999 as some banks put expansion plans on hold until crossing the Year 2000 computer date change.

There were 327 bank deals in 1999 for a transaction value of $76 billion, down from 506 deals in 1998 for $286 billion, according to SNL Securities, a Virginia-based bank research and analysis firm.

Industry consolidation is expected to accelerate in 2000, particularly because of a change in accounting standards. The Financial Accounting Standards Board has proposed eliminating the pooling of interest method of accounting and requiring purchase accounting to be used for all corporate deals.

Purchase accounting requires acquiring companies to account for goodwill, which is the amount of money paid in the transaction above the actual book value of the company being acquired.

"What the Financial Accounting Standards Board is saying is the pooling method, more or less, hides the transaction. Where the purchase accounting method is more open. Investors can see the price of the deal and how much goodwill was written off," said Michael Tober, a partner with the accounting firm Gaines, Metzler, Kriner & Co. in Buffalo.

While the pending accounting change may motivate banks to make deals in 2000, the stock market may have a chilling effect. The stock price of most banks dropped in late 1999, which depresses the value of stock as a currency for transactions.

For example, M&T's stock price fell 27 percent from a high of $566 a share in July to close 1999 at $414.25.

"It's fundamentally been a disconnect between our stock price and cash earnings per share," Paul said. "We are focused on running the company right. . . . In the long run, we think running the company right will have its rewards."

Some industry analysts believe merger and acquisition activity will not hit full speed until bank stock prices recover.

"When the acquirers don't have good valuations, they can't do deals," said Mary Beausoleil, editor of Bank Mergers & Acquisitions, an industry newsletter published by SNL Securities. "But the fundamental reason for consolidation in the industry hasn't changed. There is still excess capacity."

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