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First Niagara says glitches minimized at branches

First Niagara Financial Group is still confronting some limited problems with individual customers a week after its conversion of HSBC Bank USA's branches, but executives say the vast majority of customers are now doing their regular banking without any difficulty.

Customers continue to make sporadic complaints about frustrations with their new bank, 12 days after Buffalo-based First Niagara took over more than 100 branches and 500,000 customers across the state.

The complaints included delays in branches or on phone lines, difficulty accessing online banking services, credit or debit cards that aren't working, or missing checks that hadn't arrived before the conversion.

But executives said the reports of problems are actually few and far between, relative to the number of branches and customers that changed hands. And they insist that there are no lingering issues with the system. Even the wait times on the phone lines have fallen dramatically.

"This is going to be a great transaction for us. We're off to a real strong start," said Frank J. Polino, executive vice president of corporate initiatives.

First Niagara bought 195 HSBC branches on May 18 for $900 million, but plans to sell 64 to KeyCorp, Community Bank System and Financial Institutions, while closing 35 that overlap. The rest were converted to First Niagara's systems over that same weekend, with $9.8 billion in deposits and $1.6 billion in loans.

The deposits were $1.2 billion lower than originally estimated when the deal was announced last July, due to $600 million in deposits from customers outside First Niagara's market and $800 million in customer attrition. That was partly offset by an increase in public, government balances. Loans were down by $300 million from last July's expectation, primarily because of mortgage and home equity refinancings.

The bank took heat initially for long wait times on the phones and long lines in branches, as the volume of calls and activity exceeded the bank's expectations. Customers also complained of credit and debit cards missing or not working, branch staff not understanding what they were doing or knowing the answers, and online banking that didn't work.

But except for the phone delays due to volume, officials said, those were largely individual problems, not system issues.

The online banking and bill-paying system was down for two hours May 18 due to a problem with the software vendor, not the bank, and it was fixed.

Bad addresses on file also caused big delays in mailing debit cards and checks to some customers. The bank mailed out new cards as soon as it learned of the problem and fixed the addresses, but deliberately waited a little longer to reissue new checks "until we felt more comfortable" with the new information, especially for small-business customers, Polino said. He noted that the old HSBC checks continue to work for 90 days, unlike the debit cards.

Meanwhile, customers are activating cards and banking as usual. Polino said that more than 100,000 former HSBC customers have "signed on successfully" to online banking, where they have seen and paid bills.

More than 225,000 customers have activated debit cards -- right where First Niagara officials expected after six business days -- and 119,000 have activated credit cards, or 84 percent of those with balances on the cards at the time of the transfer.

And wait times are down sharply. The bank's "speed of answer" is down to 4 1/2 minutes on complicated questions, less than a minute for credit card questions, and 30 seconds for basic Internet questions.

That's down from 8 to 10 minutes, or longer, last week, although Scott Fisher, First Niagara's senior vice president and retail channels director, wants it reduced to 90 seconds or less for all calls. "We're getting very close to that," he said.

Finally, officials said that the bank is holding on to HSBC customers and that openings of new accounts are running ahead of closings, with an average of 1.25 new accounts opened for each one closed.